EU Commission publishes sustainable finance taxonomy

The European Commission has published its EU-wide classification system for environmentally sustainable economic activities.

The taxonomy will lay the foundations for all other measures on sustainable finance and help define what can be labelled as a sustainable investment in the EU. A unified taxonomy will help build momentum for climate-friendly investments and allow investors, including individuals, to invest their money in line with their sustainability preferences. A robust, evidence-based taxonomy will also make it possible to determine which investments, such as loans, stocks and bonds, are really environmentally sustainable and limit the risk of greenwashing.

While the European Commission — supported by the Technical Expert Group on Sustainable Finance (TEG) and later the Platform on Sustainable Finance — was successful in achieving a scientific and evidence-based approach for some economic criteria, the final proposed Delegated Act goes against the science-based recommendations of the TEG for activities related to bioenergy and forestry, with critics arguing carbon-intensive member states held too much sway

“The forestry and bioenergy outcome is disappointing, after a concerted effort and more ambitious recommendations from diverse experts to follow a comprehensive scientific evidence-based mandate,” said Sandrine Dixson-Declève, Co-President of the Club of Rome and a member of EIT Climate KIC’s Advisory Council and the Platform on Sustainable Finance.  

Today the European Commission announced a provisional agreement between co-legislators on the new European Climate Law, turning Green Deal targets into legal obligations. As one of the key elements of the European Green Deal, the law enshrines the EU’s commitment to reaching climate neutrality by 2050, with the intermediate target of reducing net greenhouse gas emissions by at least 55 per cent by 2030, compared to 1990 levels.

Transitioning to a climate-neutral economy by 2050 will require clear tools and guidance that reflect scientific evidence as well as market experience in order to give companies and investors confidence, helping to grow low carbon sectors and decarbonise high emission ones.

”We strongly recommend that at this point the European Commission demonstrates its leadership and ensures that the Delegated Act defines a coherent, credible, impactful and usable taxonomy for sustainable investment,” said Kirsten Dunlop, CEO of EIT Climate-KIC.

“In order to reach the EU’s 55 per cent reduction targets, it’s critical we see financial flows to green areas and a shift to long-term sustainable finance.”

 
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