Ecology, EU – Baltic States, Financial Services, Modern EU

International Internet Magazine. Baltic States news & analytics Thursday, 02.04.2020, 09:33

“Green financing”: creating durable, effective and sustainable solution

Eugene Eteris, BC International Editor, Copenhagen, 19.12.2019.Print version
European Parliament and the Council reached a political agreement on the creation of the world's first-ever “green list”, i.e. a classification system for sustainable economic activities, called “taxonomy’. It will “scale-up” private and public “financial transition” to a climate-neutral and green economy, redirect capital to sustainable economic activities and projects.

The agreement “creates a common language” between the two EU institutions (an executive and legislative) to make all kind of investors be safe and effective while investing in projects and economic activities that have a substantial positive impact on the climate and the environment. Besides, this political agreement underlines the EU's commitment to implementing the 2015-Paris Agreement and reach climate-neutrality by 2050. 


The political agreement is part of the Commission's Action Plan on financing sustainable growth and is an integral part of the Capital Markets Union's efforts to connect finance with the needs of the real economy. It will both allow investors to rely on “green investment” structures and activate private capital for the sake of green transition. 


Environmentally sustainable economy

The EU action plan on sustainable finances was adopted by the European Commission in March 2018 with three main objectives: a) reorient capital flows towards sustainable investment, in order to achieve sustainable and inclusive growth; b) manage financial risks stemming from climate change, environmental degradation and social issues; and, c) foster transparency and long-term financial and economic activity.


More in: https://ec.europa.eu/info/publications/180308-action-plan-sustainable-growth_en

 

The present agreement –for the first time in the EU “financial services” – makes a common classification system (taxonomy) which provides a definition of “environmentally sustainable” economic activities. The aim of this green list (taxonomy) is to: a) reduce fragmentation resulting from market-based initiatives and national practices, and b) reduce "green-washing", i.e. the practice of marketing financial products as "green" or "sustainable", when in fact they do not meet basic environmental standards.


The political agreement sets out a general framework for what can be classified as an “environmentally sustainable economic activity”. Notably, it sets out the following six environmental objectives: climate change mitigation and adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems.


Four main requirements define the economic activities in compliance with the “green list”: a) activities that provide a substantial contribution to at least one of the mentioned “environmentally sustainable activities”; b) providing “no significant harm” to any of the mentioned objectives; c) activities that comply with robust and science-based technical screening criteria; and, d) complied with minimum social and governance safeguards.


EU institution’s opinion

In the European Commission’s welcoming note, the agreement was praised as assisting (“scale-up” in the Commission’s words) private and public investments to finance the transition to a climate-neutral and green economy, redirecting capital to economic activities and projects that are truly sustainable.


The Commission Executive Vice-President Valdis Dombrovskis (responsible for “Economy that Works for People”), noted that a corresponding legislation would be “a game-changer in terms of tackling climate change, because it will enable billions in green investments to flow”. He underlined that for the first time in the EU banking and financial sectors “green list taxonomy” would have a precise definition and thus would give a real boost to sustainable investments and be crucial for the implementation of the European Green Deal.  


Source: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_6793


More on “green deal” in: “Green Deals’” final approval: great days for Europe. In:

http://www.baltic-course.com/eng2/modern_eu/?doc=153069

and EGD’s postponement until summer 2020. In: http://www.baltic-course.com/eng2/modern_eu/?doc=153093;

 






Search site