Climate change and low-carbon solutions are affecting investors ’portfolios.
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LONDON – The lack of clarity on what should be classified as climate-friendly investment has been one of the biggest obstacles preventing money from flowing into the area. But the EU wants to change that.
Investors have complained that it is difficult to select which companies act responsibly on the climate front, because there has not been a common set of rules for analyzing the key information needed.
However, the European Commission, the EU’s executive arm, announced on Wednesday a new set of rules aimed at clarifying what can be classified as green investment and what is not. This regulation is expected to facilitate investors ’investment in projects that contribute to the sustainability of the planet.
The classification, known as taxonomy, will now be discussed with member states and European legislators before it becomes law. It is part of the EU’s broader efforts to become the world’s first carbon-neutral continent by 2050.
“We are making a leap forward with the first climate taxonomy that will help companies and investors know if their investments and activities are truly green. This will be essential if we want to mobilize private investment in sustainable activities and make Europe climate neutral. for 2050, “European Commission Executive Vice President Valdis Dombrovskis said in a statement.
To achieve its goal of carbon neutrality, the commission has suggested that member states should reduce their emissions by at least 55% by 2030, compared to 1990 levels. And there will be regular checks on the efforts made. they are doing nationally.
“Significant investments are required to green our economy. We need all companies to play their part, both those that have already made progress in greening their businesses and those that need to do more to achieve sustainability,” said Mairead McGuinness, the commissioner responsible for financial services. in a statement.
What is green?
The new classification considers economic activity to be climate-friendly if it contributes to one of two possible objectives: it is to reduce or prevent the adverse impact of climate change on oneself, on people, nature or assets; or if it contributes to the reduction of greenhouse gas emissions.
The new document, which the commission says is based on science-based criteria, is just a first step and is expected to be updated over time.
“These criteria create common ground for businesses and investors, allowing them to communicate about green activities in a credible way and helping them navigate the transition to sustainability,” the commission said in the document.
He added that the new criterion covers the economic activities of approximately 40% of listed companies domiciled in the EU, in sectors that are responsible for almost 80% of direct greenhouse gas emissions in Europe.
However, this does not include nuclear power or gas activity, at least for now.
The commission is waiting for some more information before deciding whether or not the core, a divisive issue, will appear in the taxonomy. But ultimately, this is subject to some political pressure from member states that have large investments in nuclear power, such as France.