Sustainable investment regulation to boost green economy

sustainable investment
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Negotiators from the European Parliament and the Council of the EU have reached an agreement on new criteria for sustainable investment.

The ‘taxonomy regulation’, aimed at protecting and supporting investors while ensuring economic activities are aligned with the EU’s overarching goals on ameliorating the effects of climate change, details a number of objectives which should be taken into account when determining investment. It sets out a standardised classification system for ensuring an economic activity is largely sustainable; while tightening regulation on the ways activities can prove their sustainability, in order to protect investors from ‘greenwashing’ in industry.

The Environment Committee’s lead negotiator Sirpa Pietikainen said: “The taxonomy for sustainable investment is probably the most important development for finance since accounting. It will be a game changer in the fight against climate change. I am satisfied that we reached a balanced agreement with Council, but this is only the beginning. Greening the financial sector is a first step to make investments flow in the right direction, so it serves the transition to a carbon neutral economy.”

The taxonomy regulation lays out the following objectives to be considered for sustainable investment practices:

  • Mitigation of climate change and adaptation to its effects;
  • Ensuring sustainability in the exploitation of marine resources;
  • Accelerating the transition to a fully circular economy by preventing waste and increasing the usage of secondary raw materials;
  • Preventing and controlling pollution; and
  • Conserving and restoring ecosystems and preserving biodiversity.

Bas Eickhout, rapporteur for the Economic Affairs Committee, said: “All financial products which claim to be sustainable will have to prove it following strict and ambitious EU criteria. The compromise also includes a clear mandate for the Commission to start working on defining environmentally harmful activities at a later stage. Phasing out those activities and investments is indeed as important to achieve climate neutrality as supporting decarbonised activities.”

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