What is a green financial product? What does it mean to invest in a sustainable business?
These and other questions have been at the basis of our negotiations on the so called “Taxonomy”, a European rulebook that identifies the criteria to determine whether an economic activity is sustainable.
After three months of “trilogues” (inter-institutional negotiations between the EU Commission, the EU Parliament and the EU Council) that I chaired together with my colleague and Chair of the Environment Committee, on Monday December 16th – around 11.30pm in Strasbourg – the political agreement has finally been found.
This is the first and the most ambitious project on a global scale and our common objective is to ensure that it represents the first step of an international standard.
This proposal is part of the EU’s larger mission to reach the 2016 Paris Agreement objectives on climate change and the SDGs set out in the UN 2030 Agenda.
Until today, Member States differ in their interpretation of what can be defined a sustainable investment: for this reason the European Commission has deemed necessary to develop a proposal with clear criteria aimed at preventing “greenwashing” activities (or “fake green”).
At the heart of the proposal, there are six criteria to define a green investment: (1) the mitigation of climate change, (2) the adaptation to climate change, (3) the sustainable use and protection of water and marine resources, (4) the transition to a circular economy, the prevention and the recycling of waste, (5) the prevention and control of pollution, (6) the protection of ecosystems.
Moreover, a significant innovation in the approach ensures that a sustainable investment needs to respect these criteria and must not cause any “significant harm” to any of them.
I am also very pleased that a principle long fought for by the S&D Group has also been accepted: a sustainable investment must also take into consideration the social sustainability. Because social and environmental sustainability must go hand in hand. For instance, an electric car whose battery has been produced through child labour, cannot be defined sustainable!
For this reason we have fought to ensure this taxonomy also included social aspects and the final result is certainly a good start: in order to be considered sustainable, the activities will also need to respect a series of international standards (at the UN, OECD and ILO level) and the European Social Pillar.
We will remain vigilant and will fight to ensure that the ensuing legislation, which will implement such norms, will maintain such high standards.
Much of the Green Deal recently presented by Ursula Von Der Leyen, will be based on this agreement; and we expect that the Deal will actively support and accelerate the European economy’s transition to a sustainable model of inclusive growth.
According to the estimates of the EU Commission, in order to achieve the 2030 objectives on climate and energy, additional investments of 260 billion euro will constantly be needed every year (equivalent to 1,5% of GDP). Large part of these investments will need to come from the private sector, even through a reorientation towards green activities, and this rulebook will decisively contribute to such objective.
I apologise for the long post but I wanted to try and explain a complex agreement which I believe to be of fundamental importance. And I am sorry if I did not update you “in real time” but it has been a hectic week: in addition to close this deal, a couple of nights ago we closed another one on Crowdfunding platforms which I will tell you about soon, and the day before we approved the Resolution on Fair Taxation which I already told you about!