EU-Commission specifies the EU taxonomy on sustainable investments

On 21 April, the European Commission endorsed the first EU delegated acts, which are to contribute giving concrete shape to the recently introduced framework to facilitate sustainable investment (also known as "green taxonomy").

Last year, the EU legislature approved the Regulation laying down the green taxonomy, which sets out the criteria that economic activities - and hence also investments in these activities - must comply with to qualify as "environmentally sustainable". The final objective is to enable investors to tell genuine sustainable investment opportunities from the non-genuine ones, to fight back the phenomenon of companies being funded as green while they are actually just reported as such (so called "greenwashing"). The taxonomy should, as a consequence, improve the financing of genuinely green activities and enable the EU to reach the goals set by the 2016 Paris Agreement on climate change and the United Nations 2030 Agenda for Sustainable Development.

The green taxonomy needs to be spelled out in detail by the Commission through delegated acts to get operational. However, it is precisely in the formulation of the delegated acts that a heated debate has broken out over which economic activities are to be regarded as sustainable. The debate is particularly heated when it comes to assessing the "sustainability" of natural gas and related technologies, as well as nuclear energy.

Due to these growing tensions over whether natural gas and nuclear energy are sustainable technologies, the Commission decided today to adopt a complementary legislative act in the summer of 2021. Open points are then to be clarified in it.

The cep has already warned against such development in a cepPolicyBrief on the Commission's original proposals, in which we pointed out that there is no need for such an EU taxonomy as there is ultimately no objective or uniform understanding of "sustainability". This can be seen precisely in the heated discussions leading up to the decisions today. There is no need for a sovereignly defined green taxonomy that specifies exactly what counts as sustainable and what does not. It is perfectly legitimate to classify sustainable activities by using different criteria and weighing them differently in case of conflicts between different environmental objectives. The existence of many private taxonomies and labels that define what is meant by "sustainability" also reflects this.