Climate change and low-carbon solutions have an impact on investors’ portfolios.
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LONDON – The lack of clarity on what should be classified as a green investment has been one of the biggest obstacles to the flow of money in that area. But the EU wants to change that.
Investors complained that it is difficult to select which companies act responsibly on the climate, because there was no common set of standards to analyze the key information needed.
However, the European Commission, the EU’s executive arm, announced on Wednesday a new set of rules aimed at clarifying what can be classified as green investment and what cannot be. This regulation is expected to make it easier for investors to invest their money in projects that will contribute to the sustainability of the planet.
The classification, known as taxonomy, will now be discussed with Member States and MEPs before it becomes law. It is part of the EU’s wider efforts to become the world’s first carbon-neutral continent by 2050.
“We are taking a leap forward with the first climate taxonomy that will help companies and investors know if their investments and activities are really green. This will be essential if we want to mobilize private investment in sustainable activities and make Europe climate-neutral by 2050, “European Commission Executive Vice-President Valdis Dombrovskis said in a statement.
In order to achieve its goal of carbon neutrality, the Commission suggested that Member States should reduce their emissions by at least 55% by 2030 compared to 1990 levels. And national efforts will be regularly monitored. .
“Significant investment is needed to green our economy. We need all companies to play their part, both those that have already made progress in greening their businesses and those that 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 that an economic activity is favorable to the climate if it contributes to one of two possible objectives: it reduces or prevents the negative impact of climate change on it, on people, nature or assets; or if it contributes to reducing greenhouse gas emissions.
The new document, which the commission says is based on science-based criteria, is just a first step and is expected to be updated over time.
“These criteria create common ground for businesses and investors, enabling them to communicate credibly about green activities and help them make the transition to sustainability,” the commission said in the document.
He added that the new criteria cover the economic activities of around 40% of listed companies based in the EU, in sectors that are responsible for almost 80% of direct greenhouse gas emissions in Europe.
However, this does not include the activity of nuclear energy or gas, at least for the time being.
The Commission is awaiting further information before deciding whether or not the nuclear, a divisive subject, will appear in the taxonomy. But in the end, this is subject to political pressure from Member States that have large investments in the nuclear field, such as France.