Finance Watch, the independent non-profit association with a mission of making finance serve society, regrets this missed opportunity to align the taxonomy regulation, which is the key pillar of the EU Sustainable Finance Action Plan, with the EU’s commitments of the Paris Agreement and the United Nations Sustainable Development Goals.
Benoît Lallemand, Secretary General of Finance Watch, commented:
“Today’s vote is a weak response to the millions of EU citizens in the streets, especially the young, who are urging politicians to get serious about stopping climate change and environmental damage now.
All economic activities need to be ranked by their environmental performance. Without including a “brown” taxonomy, it is illusionary to think that finance will disinvest from economic activities which rely heavily on fossil fuel energy. The shift to a low-carbon world can only happen if there is a significant re-direction of capital and not just an increase in green investment.”
The main short-comings of the taxonomy regulation as voted by the European Parliament are the following:
- The final text does not include criteria for economic activities with a negative environmental impact, which is key if we are to have fully informed investors and promote the capital shift.
- No disclosure requirements are included for investee companies. Investee companies should be requested to disclose the information that is needed for the implementation of the Taxonomy Regulation.
- The final text does not include an ambitious review clause, covering other sustainability objectives, in particular social objectives.
However, there are positive amendments to the Commission’s proposal that the European Parliament voted for:
- The taxonomy proposal might help to address the problem of greenwashing by preventing coal, nuclear and high-carbon activities from getting the ‘sustainable’ rating.
- The ambition of the social safeguard measures has been raised to include UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance for Responsible Business Conduct.
For further information or interview requests, please contact:
Charlotte Geiger, Senior Communications Officer at Finance Watch, at firstname.lastname@example.org or at 0032/(0)474331031.
NOTES TO EDITORS
At the end of 2016, the European Commission appointed a High-Level Expert Group (HLEG) with the mandate to advise reforms, on which to base the EU legislative framework on sustainable finance. Under its first recommendation, the HLEG called for the establishment of an EU sustainability taxonomy in order to provide clarity on what economic activities can be considered environmentally sustainable. Currently several classifications systems exist with the risk of creating confusion among investors. Moreover, several Member States are taking initiatives to adopt national standards which could create barriers to the development of the EU market for the sustainable financial products.
On 23 May 2018, The European Commission presented the Sustainable Finance Package, which included the proposal for the Regulation on the establishment of a framework to facilitate sustainable investment (COM(2018) 353 final).
In the European Parliament’s Environmental (ENVI) and Economic (ECON) committees meeting on 11 March 2019, key amendments to the proposal that had been put forward by rapporteurs Bas Eickhout (Greens/EFA) and Sirpa Pietikäinen (EPP) were rejected by tiny majorities. The amendments included the expansion of the taxonomy to cover social issues, the inclusion of a ‘brown’ taxonomy, and the integration of human rights into the methodology.
On 13 March 2019, the Rapporteurs of the European Parliament published their report on the legislative proposal for the plenary vote that took place on 28 March 2019. The result of the vote can be found here on pages 98 and 99.
The EU Council is expected to reach its final position in April.