The European Commission has welcomed a new political agreement between the European Parliament and the Council on the creation of the world's first-ever “green list” – a classification system for sustainable economic activities, or taxonomy.
This will create a common language that investors can use everywhere when investing in projects and economic activities that have a substantial positive impact on the climate and the environment. It will help scale up 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.
This political agreement underlines the EU’s commitment to implementing the Paris Agreement and reach climate-neutrality by 2050.
Up until now, there has been no common classification system at EU or global level that provides a definition of “environmentally sustainable” economic activities. The aim of this green list is to:
- Reduce fragmentation resulting from market-based initiatives and national practice
- Reduce “greenwashing”, i.e. the practice of marketing financial products as “green” or “sustainable”, when in fact they do not meet basic environmental standards.
This political agreement set 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
- Climate Change 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 requirements that economic activities need to comply with in order to qualify
- They provide a substantial contribution to at least one of the six environmental objectives above;
- “No significant harm” to any of the other environmental objectives;
- Compliance with robust and science-based technical screening criteria; and,
- Compliance with minimum social and governance safeguards
The agreement sets out a general framework for green investment. A list of sustainable economic activities will be assessed based on the report from Technical Expert Group on Sustainable Finance and will be developed through delegated acts.
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