EU taxonomy and sustainable finance
The European Green Deal aims to mobilise private investment for the transition to a climate-neutral economy. Hence, in the context of its Action Plan: Financing Sustainable Growth, the EU created a unified classification system – or taxonomy framework – for a shared understanding of what ‘sustainable’ investments are.
table of contents
Large sums of money must be invested if Austria is to achieve its 2040 climate targets, and the European Union to achieve its 2050 targets. These investments will create sustainable growth, thus adding value and creating jobs in futureproof sectors.
EU Taxonomy Regulation and sustainable finance
Which investments and economic activities are environmentally friendly? Which ones actually contribute to meeting our climate targets? We need clear, transparent answers to these questions. That’s why the EU agreed the Taxonomy Regulation (→ EUR-Lex) in June 2020. This Regulation stipulates that economic activities only qualify as green if they make a major contribution to achieving environmental objectives. At the same time, ‘green’ activities must not significantly harm other environmental objectives.
For example: Generating electricity from wind qualifies as green because, since it uses a renewable source of energy, it makes a major contribution to climate protection. At the same time, wind farms must comply with all applicable regulations, including on protecting wildlife.
The Regulation places an obligation on financial market participants and large companies to disclose any taxonomy-relevant sales and investments as well as the share of these in sustainable financial products. This goes further than existing reporting obligations arising from the Disclosure Regulation (→ EUR-Lex) and the Non-Financial Reporting Directive (→ EUR-Lex), as it includes information relevant to the taxonomy. What is more, member states and the EU itself must also apply the taxonomy in any certification systems they have for green finance products. This will help investors to choose an environmentally friendly finance product, such as a sustainable investment fund or insurance product. It is also a way of preventing greenwashing: companies may no longer call their products green unless they meet the requirements.
Climate protection and climate change adaptation targets
In June 2021, the European Commission adopted its detailed Sustainable Finance Package of requirements for economic activities, which became effective on January 1, 2022. The package supports climate protection and climate change adaptation. Its list of economic activities covers 40 percent of companies listed on the stock market and 80 percent of direct greenhouse gas emissions within the EU. The package’s thresholds for environmental sustainability were based on recommendations by the Technical Expert Group, with input from stakeholders.
Technical screening criteria are applied to a wide variety of economic sectors including manufacturing, energy generation, forestry, water, construction, waste, transport and information technology. A permanent expert group of the European Commission, the Platform on Sustainable Finance, was established under the Taxonomy Regulation. Among its other responsibilities, the Platform will help the Commission to develop the technical screening criteria.
Science-based criteria are crucial
The financial sector is a central lever for achieving our climate goals. Austria supports the EU Sustainable Finance Strategy and the EU Taxonomy, which is an essential element of sustainable finance and should not be watered down. It is especially important to Austria that these EU taxonomy criteria are science-based and credible. This is the only way we can ensure consumers know where they’re investing their money. In recent months, Austria has strengthened its resolve on this issue. As a country, we have clearly stated that technologies such as nuclear power and energy from fossil fuels cannot be classified as ‘green’.
Study: Nuclear energy is not a green investment
A recent study commissioned by the Ministry of Climate Action confirms that nuclear energy does not meet the requirements of the EU Taxonomy Regulation from a legal perspective. Nuclear energy cannot be considered an "environmentally sustainable economic activity" or a "transitional activity" within the Taxonomy Regulation. The study concludes that any legal act adopted on the basis of the Taxonomy Regulation that includes nuclear energy in the European taxonomy would be open to challenge before the EU courts.