Today the European Parliament plenary adopted a draft regulation on a classification (taxonomy) of sustainable investments with a majority of Christian Democrats, Liberals and Greens, while Social Democrats abstained. This uniform classification sets criteria for the definition of environmentally “sustainable” financial products.
On the initiative of Christian Democrat and right-wing MEPs a narrow majority voted against strengthening the EU Commission’s proposal at the vote of the responsible committees for economic and monetary affairs (ECON) and environment (ENVI) the week before last week. They voted against the ambitious proposals of the Green and Christian Democrat co-rapporteurs. The rapporteurs had wanted to explicitly exclude environmentally harmful economic sectors from green financial products and extend the rules not only to financial products already marketed as sustainable, but to all financial products and investments.
Today, the majority of MEPs voted in favour of an improved text. In addition to the committee result, we have achieved that solid fossil fuels (coal), nuclear power and gas infrastructure must never be included in sustainable financial products. Moreover, providers of sustainable financial products must ensure the higher human rights standards of the United Nations, rather than just the weaker International Labour Organisation (ILO) rules as proposed by the Commission. Greenwashing is made more difficult by requiring providers of green financial products to invest in truly sustainable investments in and disclose those investments.
The use of the taxonomy is unfortunately limited to the green niche, instead of being applied to all areas as we have requested. After all, providers of unsustainable financial products must warn that their product does not meet any sustainability criteria. The dispute over the use of the taxonomy must now be continued financial sector by financial sector. Nor is the social taxonomy demanded by Social Democrats and Greens part of today’s resolution. Today’s decision represents the European Parliament’s negotiating position for the forthcoming interinstitutional negotiations with the Council of Ministers and the EU Commission.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group, commented:
“This taxonomy makes financial markets safer and more sustainable. Thanks to the taxonomy, the financial sector will make an important contribution to achieving the goals of the Paris Climate Agreement. The exclusion of coal from green financial products and the obligation of providers to invest transparently in truly sustainable investments will make greenwashing considerably more difficult. Only with the taxonomy the young market for green financial products can gain the trust of investors and flourish. Confidence-building is also the requirement for providers of sustainable financial products to respect the strong human rights standards of the United Nations.
If we fundamentally want the financial markets to be prepared for rising environmental risks, it is in the long term insufficient to regulate the green niche only. Christian Democrats and Conservatives must eventually recognise this. By preventing a social taxonomy they have shown a sign of backwardness. The Commission should quickly build on this and subject all financial products to the taxonomy, in addition to the outstanding social classification.
Sustainable investment should no longer be the exception, but the norm. Today’s investments determine how sustainable our economy will be in thirty years’ time. We will work for the use of the taxonomy in other financial sectors while respecting the principle of proportionality. We Greens will not give up until financial markets become truly sustainable. The Council must now quickly determine its position so that the new classification can soon work towards greener financial markets.”
Link to the report as put to the vote and to the amendments tabled by Green rapporteur Bas Eickhout: