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What everyone’s saying about the EU’s sustainable investment rules

The EU taxonomy for sustainable activities celebrates its one-year anniversary next month. The classification system, which is part of the larger European Green Deal, aims to create guidelines that the EU hopes will funnel investments into companies, products, and services that mitigate climate change, promote a circular economy, protect biodiversity, and more.

The framework for the taxonomy is in place, but the EU is still deep in negotiations about which economic activities can be labeled sustainable — including tricky decisions on agriculture and gas and nuclear power. The first set of the long-awaited rules was published in April, and another set is expected next year.

While the rules won’t go into effect until next year, the debate rages on.

Some critics have raised concerns that the rules will fuel greenwashing, while others are concerned about the impact on the bloc’s economic competitiveness. Supporters, however, say the taxonomy is necessary for the EU to become carbon neutral by 2050.

Here’s what they’re saying:

  • Need a quick refresher on the taxonomy? Experts from BSR put together a list of six things that companies (including those outside of Europe) should pay attention to.
  • Losing its bite? Detlef Glow, head of EMEA research at the financial software and risk solutions provider Refinitiv, argued earlier this year that classifying gas and nuclear power as sustainable would turn the taxonomy into a “toothless tiger with no real impact.”
  • How about hydro(gen)? While a draft version of the rules drew concerns from the hydrogen and hydropower lobbies, industry associations welcomed changes made ahead of publication in April. William-James Kettlewell, an associate at the law firm Baker McKenzie, describes the changes as “good news for the hydrogen industry and should help to channel much needed private investment towards it.”
  • What trumps what? Writing in New Europe, Manuela Ripa, a German member of the European Parliament, makes the case for a holistic approach that balances economic opportunity with environmental protection.

“The question before us is: Are we now facing a wave of investments for economic activities that may, at first sight, be beneficial, but upon closer inspection harm water resources, biodiversity, and the environment?”

Manuela Ripa, member of the European Parliament
  • More data required. Last year, 26 major EU-based lenders tested the framework. The report, released earlier this year by the European Banking Federation and the United Nations Environment Programme Finance Initiative, found that the availability and quality of data is one of the major roadblocks to classifying investments that can be marketed as sustainable.
  • No time to lose. The global engineering, architecture, and consultancy company Ramboll urges companies to determine the environmental sustainability of their economic activities now in preparation for 2022. Here are five reasons why.

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