Brussels said the framework would help stamp out so-called “greenwashing”, when countries and companies seek to make their environmental credentials look better than they are. Alexander Weber writes for Bloomberg News on the Financial Post website about the adoption of “taxonomy for sustainable activities.”
Europe Reaches Deal on Landmark Rules Governing Green Investment
European Union policy makers sealed a deal to create a classification system for green financial products, aiming to strengthen the rapidly growing market’s legitimacy.
Lawmakers from the bloc’s parliament reached an agreement with representatives from national governments after marathon talks in Brussels. The rules will help craft common definitions for environmentally friendly investments and intend to thwart “greenwashing” — where products are marketed as sustainable, even if they don’t really help fight climate change.
“With credible and ambitious definitions for sustainable investment, the EU will lead the world in sustainable finance,” Bas Eickhout, a Green Party lawmaker in the European Parliament who led work on the file, said in a statement.
The Greens say the classification system, or taxonomy, would make coal ineligible as a sustainable investment — and also likely exclude nuclear energy, a contentious point in the talks, under a “no harm” test. EU member states’ attempts “to politicize the environmental criteria in order to include their own national industries” were resisted, the Greens said.
The taxonomy could ultimately see a range of applications. While it could be a foundation for how products are labeled, helping money managers decide which assets to buy, it could also help central banks direct their asset purchases.
The understanding reflects “the increased ambition of the new Commission on financing the green transition,” said Valdis Dombrovskis, the EU commissioner for financial-services policy.
The deal, which still needs to be confirmed, is just the first step on the way to a concrete list of definitions. That will be drawn up based on recommendations from a panel of experts, which has already issued a report this year covering almost 70 economic activities ranging from agriculture to transport and manufacturing.
Financial products that don’t make any claims of being green would have to include a disclaimer “to clarify that their investments are not screened for sustainability effects,” according to the Greens.