European Commission to stem flow of greenwashing

The European Commission’s expert group on sustainable finance has published a draft list of projects that can be deemed ‘green and climate-proof’.

As there is no agreed definition for what counts as ‘green’ or ‘sustainable’ in financial markets, at the moment banks and rating agencies are free to define for themselves what a ‘sustainable investment’ is, and almost half of the total managed assets in 2018 in Europe, approximately $14tr, have been deemed ‘sustainable investing assets’, according to the Global Sustainable Investment Alliance (GSIA).

The EC has hopes that their list could become a ‘gold standard for sustainable finance’ with a draft list for the transport sector including only cars with zero tailpipe emissions, such as electric and hydrogen vehicles, from 2026. It excludes airports or any other project promoting aviation. Zero direct emissions land transport like metro lines, trams, trolleybus, bus and rail are also eligible as well as bike lanes and public recharging stations for EVs.

Samuel Kenny, sustainable finance officer with Transport & Environment, said: “The market for sustainable finance is booming but, with a lack of consistency or oversight, banks and rating agencies are prone to diverting money to dirty fossil fuels and other investments incompatible with the Paris Agreement.”

However, Kenny raised an objection to the definitions, saying: “The expert group runs the risk of jeopardising the credibility of the entire EU taxonomy with the inclusion of biofuels. Investing in such fuels such as palm oil diesel will not get us to net zero by 2050 as it will cause environmental damage upstream.”

The proposal will be the subject of public consultation over the summer with a final list to be published by the Commission expert group in November. This final list of recommendations will then be the basis for the Commission to start drafting the EU’s taxonomy for sustainable finance.

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