EU seeks to expand green taxonomy beyond climate
August 6, 2021
European Union officials working on the bloc’s proposed green taxonomy have put forward plans to expand it beyond climate change.
Two documents, published earlier this week, have proposed extending the taxonomy to include classifications for companies contributing to other environmental goals.
This includes subjects linked to the Sustainable Development Goals (SDGs), in particular biodiversity (SDG 15), water and marine life (SDG 6/14), waste management and pollution prevention (SDG 6/12), and the ‘circular economy’ (SDG 12).
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The proposals were published by the Platform on Sustainable Finance (PSF), a body set up by the EU to develop the taxonomy. The taxonomy in turn is designed to help translate the EU’s sustainable finance goals into investable guidelines for the finance sector.
According to the platform’s paper, in order to meet climate and energy targets set for 2030 and mitigate climate change, “the EU faces an investment gap of €350bn per year”.
“Moreover, further additional investments to achieve the EU’s broader environmental objectives are evaluated to be in the range of €100-150bn per year,” the report stated. “In order to close these investment gaps, the financial sector has to play a key role in re-orienting flows to support the transition towards a more sustainable economy.
“However, such reorientation of capital flows requires a common understanding among all investors, financial institutions, and companies across the EU of what a ‘sustainable investment’ is.”
As highlighted by Responsible Investor, the report explicitly excludes “biodiversity offsets” – strategies employed by companies as a way of compensating for what they see as unavoidable negative impacts of their operations. The report said such strategies “represent the ‘last resort’ measures that can be taken to limit any negative impacts on biodiversity following the full application of the mitigation hierarchy”.
The PSF’s report – available on the EU’s website – is open to feedback and comment until 24 September 2021. A final report is expected by November this year.Last Updated: 6 August 2021