The European Parliament has given the green light to new rules aimed at preventing ‘greenwashing’ and boosting potential new green investments, they announced at an event last Thursday.
Photo: Artur Roman / Pexels
The Taxonomy Regulation will act as a key piece of legislation that will contribute to the European green Deal by boosting private sector investment in green and sustainable projects.
This new ‘green list’ will provide a common language that investors can use everywhere when investing in projects and economic activities that have a sustainable or positive impact on the climate or environment.
This list will act as a classification for all activities poured into the system.
It lays down six environmental objectives and allows economic activity to be labelled as environmentally sustainable if it meets one of these six criteria without seriously hindering any of the others.
The six objectives are:
- Climate change mitigation and adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy, including waste prevention and increasing the uptake of secondary raw materials.
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems.
As set out by the regulation, the EC has also launched a call for applications for members of the Platform on Sustainable Finance.
This platform will be an advisory body composed of experts from both the private and public sector.
It will assist the Commission on the further development of this legislation to cover other sustainability objectives.
Establishing a clear European ‘green’ criteria for investors is seen as a key to raising more public and private funding so the EU can become carbon neutral by 2050, as set out in the European Green Deal.
The EU needs roughly €260 billion per year in extra investments to achieve its 2030 climate and energy targets, according to Commission estimates.
Valdis Dombrovskis, Executive Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: “The adoption of the Taxonomy Regulation today marks a milestone in our green agenda. It creates the world's first ever classification system of environmentally sustainable economic activities, which will give a real boost to sustainable investments.
“It also formally establishes the Platform on Sustainable Finance. This Platform will play a crucial role in the development of the EU Taxonomy and our sustainable finance strategy over the coming years.”
Bas Eickhout MEP, the European Parliament's rapporteur, said: "The legislation also includes a clear mandate for the Commission to start defining environmentally harmful activities, phasing out those activities and investments is as important to achieving climate neutrality as supporting decarbonised activities."
Any activities that are incompatible in achieving true carbon neutrality but considered necessary in this transition are labelled as transitional or enabling activities under the Taxonomy Regulation.
They will need to have greenhouse gas emission levels corresponding to the best performance in the sector.
Fossil fuels such as coal are excluded, but gas and nuclear energy could potentially be labelled under these same criteria as they have the potential to respect the “do not cause significant harm” clause.
The law is due to enter force soon, and the Commission has stated it will regularly update the technical screening for transitional and enabling abilities.
They hope to have fully screened and defined any criteria to identify activities that have a significant negative impact on the deal.
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