Climate change and low-carbon solutions are impacting investors’ portfolios.
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LONDON – A lack of clarity on what qualifies as a climate-friendly investment has been one of the biggest obstacles to keeping money from flowing into that area. But the EU would like to change that.
Investors have complained that it is difficult to select which companies act responsibly on climate, because there is no common set of standards to analyze the vital information needed.
However, the European Commission, the EU’s executive arm, announced a new set of rules on Wednesday that aim to clarify what qualifies as a green investment and what not. This regulation is expected to make it easier for investors to put their money into projects that will contribute to the sustainability of the planet.
The classification, known as taxonomy, will now be discussed with Member States and European legislators before it becomes law. It is part of the EU’s wider effort to become the first continent in the world to be climate neutral by 2050.
“We are taking a leap forward with the first-ever climate taxonomy that will help companies and investors know if their investments and operations are truly green. This will be essential if we are to mobilize private investment in sustainable activities and make Europe climate-resilient by 2050” European Commission Executive Vice-President Valdis Dombrovskis said in a statement.
To achieve the CO2 neutrality target, the Commission has suggested that Member States should reduce their emissions by at least 55% by 2030 compared to 1990 levels. And there will be regular monitoring of efforts being made at national level. delivered.
“Significant investment is needed to make our economy greener. We need all businesses to do their part, both those who are already advanced in greening their operations and those who need to do more to achieve sustainability,” said Mairead McGuinness, the commissioner responsible for financial services. in a statement.
What is green?
The new classification considers an economic activity to be climate-friendly if it contributes to one of two possible objectives: to reduce or prevent the negative impact of climate change on itself, on people, nature or assets; or whether it contributes to the reduction of greenhouse gas emissions.
The new document, which the committee says is based on scientific criteria, is only a first step and is expected to be updated over time.
“These criteria create a common ground for businesses and investors, enabling them to credibly communicate about green activities and help them navigate towards sustainability,” the committee said in the document.
It added that the new criteria cover the economic activities of about 40% of EU-based listed companies, in sectors responsible for nearly 80% of direct greenhouse gas emissions in Europe.
However, this does not include nuclear power or gas, at least for now.
The committee is waiting for some more information before deciding whether nuclear, a divisive topic, will be included in the taxonomy. Ultimately, however, this is under political pressure from member states that have high investments in nuclear energy, such as France.