Council of the EU: Sustainable finance: EU reaches political agreement on a unified EU classification system
18 December 2019
The EU will soon have in place a common classification system to encourage private investment in sustainable growth and contribute to a climate neutral economy. EU ambassadors today endorsed a political agreement reached between Finland's presidency of the Council and the European Parliament on a EU-wide classification system, or "taxonomy".
The taxonomy will provide businesses and investors with a common language to identify what economic activities can be considered environmentally sustainable.
The taxonomy will enable investors to re-orient their investments towards more sustainable technologies and businesses. It will be instrumental for the EU to become climate neutral by 2050 and achieve the Paris agreement's 2030 targets. These include a 40% cut in greenhouse gas emissions for which the Commission estimates that the EU has to fill an investment gap of about 180 billion EUR per year.
At present, there is no common classification system at EU or global level which defines what is an environmentally sustainable economic activity. The proposed regulation is meant to address two challenges:
-
reduce fragmentation resulting from market-based initiatives and national practices;
-
reduce "greenwashing", i.e. the practice of marketing financial products as "green" or "sustainable", when in fact they do not meet basic environmental standards.
The future framework will based on six EU 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; and
-
protection and restauration of biodiversity and ecosystems.
In order to qualify as environmentally sustainable, economic activities will have to fulfil the following requirements:
-
contribute substantively to at least one of the six environmental objectives listed above;
-
not significantly harm any of the environmental objectives;
-
be carried out in compliance with minimum social safeguards;
-
comply with specific ‘technical screening criteria’.
Full press release on Council of the EU
Related press release on the European Commission
Related article on EurActiv "EU seals deal on green finance in breakthrough for climate goals"
© Council of the European Union
