On the 18th of June, the European Parliament has adopted new legislation on sustainable investments. It lays down six environmental objectives and allows economic activity to be labelled as environmentally sustainable if it contributes to at least one of the objectives without significantly harming any of the others.
Establishing a clear set of rules defining which investments can been considered green and which shouldn't is the first step to boost sustainable investments and to pahse out the less sutainable activities: as said by Bas Eickhout (Economic Affairs Committee rapporteur , Greens/EFA, NL) ,"all financial products that claim to be sustainable will have to prove it following strict and ambitious EU criteria. The legislation also includes a clear mandate for the Commission to start defining environmentally harmful activities. Phasing out those activities and investments is as important to achieving climate neutrality as supporting decarbonised activities”.
The legislation, coming into force after publication in the Official Journal, mandates the Commission to update the technical screening criteria for transition and enabling activities. By 31 December 2021, the EC should review them and define criteria to identify activities that have a significant negative impact.
The Taxonomy will serve as common language for investment activities across the EU, making sustainable finance more popular and widespread across investors, hence making it possible to finance the transition towards climate neutral EU by 2050. The EU intends, by setting up clear standards and rules for investors, to make sustainable and green investments attractive for investors. The idea behind it is in fact that sustainable finance should mobilize also private investments and do not depend exclusively on institutional investors and public funding. Read more about the EU Taxonomy for sustainable investments on the REHVA Blog.