260 billion euros of investments in low-carbon and energy efficient technology is needed annually in Europe in order to reach the Paris climate goals. Meanwhile, about third of global financial flows are invested in unsustainable assets, while trillions are invested in fossil fuel subsidies.
“The climate emergency and environmental degradation including biodiversity requires a swift action. Public financing alone will not suffice. Fortunately, we have the necessary technology and financial resources globally,” says Sirpa Pietikäinen, European Parliament co-rapporteur on the Regulation and EPP lead negotiator on sustainable finance package for EPP Group.
Today the European Parliament Committees on Environment and Economic and Monetary Affairs overwhelmingly voted in favour of a legislation that will set clear standards for what can be labelled in future as a sustainable financial product, a sustainable taxonomy. It will harmonise how environmental impact will be measured across an investment chain, the lifecycle of an economic activity and across sectors. At the baseline will be comparable indicators.
An independent platform of experts will finalise the technical criteria for measuring sustainability assessed against six environmental objectives: climate change mitigation and adaptation, protection of marine resources and biodiversity, transition to a circular economy, and prevention of waste and pollution.
”Taxonomy will be a crucial pillar for the successful implementation of the European Green Deal”, Pietikäinen underlines. ”If we are to be serious with the green transition, in future the Taxonomy needs to be incorporated in all EU financing and programmes, including the EU budget and public procurement.
The Taxonomy Regulation completes the first Sustainable Finance package. Together with legislation on sustainability disclosure rules that will oblige financial institutions to disclose environmental risks and impact of their activities, it is a significant step towards transparency of the financial sector.
According to Pietikäinen, the next steps of the Sustainable Finance agenda should focus on a comprehensive development of sustainability accounting standards and integrate sustainability indicators in all financial legislation.
”If we want the green transition to take place in the real economy, we need to look at corporate reporting rules. All sectors and actors should be part of the change.”