The European Parliament and the Council have just agreed on a compromise on the classification of sustainable investments (taxonomy). The regulation defines which economic activities can be called sustainable in the common market and thus be included in a financial product labelled as sustainable. A sustainable financial product is one that makes a positive contribution to climate protection without harming the environment in other areas (do-no-harm principle). The classification will principally apply to all financial products. Suppliers who do not apply the taxonomy must make this public in a disclaimer. Coal is explicitly excluded from sustainable financial products. Since the environmental protection standards (do-no-harm principle) are very high, nuclear energy will not be able to qualify and thus de facto be excluded from sustainable financial products. The question of the sustainability of nuclear power was a hurdle in the negotiations until the end. The European Parliament and a coalition of Germany, Austria and Luxembourg were opposed, while France was in favour. The consensus in the room on the de facto exclusion of nuclear power was a success for the European Parliament.
The exact threshold values for the definition of sustainability will have to be worked out by the Commission. The Council and the EU Parliament will then have to agree to this proposal before the classification can enter into force. The obligation to disclose the share of sustainable activities applies not only to sustainable financial products but also to very large companies. For a comprehensive taxonomy that also classifies environmentally environmentally harmful activities and a social taxonomy, the EU Commission is to present an impact study by the end of 2021. The rapporteurs were the Green MEP Bas Eickhout (Netherlands) and the Finnish Christian Democrat Sirpa Pietikäinen.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
„This is a milestone for sustainable financial markets. Today’s result is a huge success for us Greens. We have dedicated many years of our work to the greening of financial markets. Many Christian Democrats in Berlin and Brussels had long been fundamentally sceptical about European rules for sustainable finance.
The new rules will free up private investment in a green economy and make them cheaper. For promotional banks such as the EIB and KfW, the rules will set the new standard for their investments. Even the ECB has announced that it will apply the new rules. Thus environmentally harmful investments will become more expensive.
Europe is finally creating clarity regarding the question which financial products can be called sustainable. The classification puts a stop to greenwashing. It is a great success that all financial products are obliged to apply the classification or clearly state that they do not. This will boost the impact of sustainable financial standards. Coal is explicitly excluded from sustainable financial products, while the hurdles for nuclear power are set so high that it won’t be able to find its way into sustainable financial products. The no to coal and the de facto no to nuclear power are crucial for the future success of sustainable financial products and for investor confidence.
The do-no-harm principle ensure that sustainable financial products are tested for compliance with human rights. We will continue to push the Commission to come forward as soon as possible with a proposal for a comprehensive social classification for financial products.
The new sustainability transparency will channel more investment into the greening of our economy. The financial sector will thus make an important contribution to ensuring that Europe achieves the objectives of the Paris climate agreement. In its forthcoming work on the precise thresholds for defining sustainability, the Commission must set the bar high in order to make a real contribution to climate and environmental protection.”
During this mandate, the EU Commission will present a new action plan for green financial markets: https://sven-giegold.de/dombrovskis-hearing/