When the European Commission made significant changes to the EU Taxonomy, it was officially referred to as a complementary delegated act. Experts, however, lauded the amendments made to the Taxonomy, seeing how these were done in the name of environmental protection and – possibly for the long-term – sustainable finance.
Done Quickly, But Certainly Not Rushed
The Commission takes typically several months to wrangle matters through the process of consultation, but the recent amendments to the Taxonomy were ratified in mere weeks, possibly due to adamant calls from a number of environmental experts.
The findings that led to these amendments, especially those regarding the classification of power sources as “green,” painted a compelling picture of how different nations perceive the concept of renewable energy. For example, the Commission’s independent experts concluded that while nuclear power emits very little in terms of carbon, the current manner by which nuclear wastes are disposed of or treated poses a significant danger to living organisms.
At the same time, natural gas was also noted to have failed with regard to meeting the environmental performance threshold of 100g of carbon dioxide equivalent emissions stated in the Paris Climate Agreement.
These amendments were specifically made for France with regard to the classification of nuclear power and Germany with regard to natural gas. As of press time, the aforementioned changes remain in review.
While rather sudden, the amendments to the EU Taxonomy were not unexpected. It was always understood that it would be subject to political intervention, but people did find it surprising that the sustainable finance sector seemed to be mum about the development. Indeed, as politicians raise their voices regarding various points in the Taxonomy, most sustainable investors have become mere spectators – but there is a reason for this.
The EU Taxonomy – and its counterpart taxonomies in member states – is a tool for the sustainable investment community: a reference to be used in lieu of actual expert advice. However, the gross lobbying of those from the nuclear and gas sectors seems to have forced the bureaucrats to shove the needs of other industries to one side, especially those of sustainable investors.
Despite this, however, the Taxonomy remains a vital tool for investors. After all, it is a regulatory requirement and one necessary for understanding related disclosures. But the recent amendments should also be seen as an opportunity for dialogue with EU officials regarding how other changes stand to affect the way sustainable investment is made in and around the region.