EU sets out classification for 'green investments'

By Caoimhe Toman

Date: Wednesday 21 Apr 2021

EU sets out classification for 'green investments'

(Sharecast News) - The European Union has rolled out its classification system for what constitutes a "green investment" in order it was hoped to help investors better channel money towards the sector.
Brussels has for a long time been keen to eliminate one of the biggest obstacles for investors in the space, as many were dubious about what a "green investment" entails.

According to CNBC, investors complained that it was hard to determine which companies were acting responsibly on the climate front, due to the lack of a common set of standards to analyse the key information needed.

The classification system, or taxonomy, still needs to be discussed with member states and European lawmakers before becoming law. Nevertheless, it was part of a collective effort by the member states to be carbon neutral by 2050.

Parameters for economic activity to be considered as climate friendly included considering whether it contributes to one out of two possible objectives: reducing or preventing the adverse impact of climate change on itself, on people, nature or assets; or whether it is contributing to the reduction of greenhouse gas emissions.

Criteria covered the economic activities of roughly 40% of EU-domiciled listed companies, in sectors responsible for almost 80% of direct greenhouse gas emissions across the Continent.

The taxonomy did not include nuclear energy - at least for now.

"We are taking a leap forward with the first-ever climate taxonomy which will help companies and investors to know whether their investments and activities are really green. This will be essential if we are to mobilize private investment in sustainable activities and make Europe climate-neutral by 2050," European Commission Executive Vice President Valdis Dombrovskis said in a statement.

"Significant investments are required to green our economy. We need all companies to play their part, both those already advanced in greening their activities and those who need to do more to achieve sustainability," Mairead McGuinness, the commissioner responsible for financial services, added.

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