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ECON and ENVI Committees adopted on Monday amendments to a proposal setting out uniform criteria for determining whether an economic activity is environmentally sustainable.

The aim of the proposal is to gradually develop an EU taxonomy for climate change and environmentally and socially sustainable activities to provide economic actors and investors with clarity on which activities are considered sustainable, thereby allowing them to take more informed decisions.


The amended proposal was adopted by a slim majority of 52 votes to 45 and 19 abstentions, with left and right of centre groups split down the middle.


After the vote, co-rapporteur Sirpa Pietikäinen (EPP, FI) said:


“The biggest challenge is to define the impact of how sustainable different investments are based on harmonised indicators. In this way, investors can identify how to disinvest from activities that have a harmful impact on the environment and invest in sustainable activities. We have tens of trillions in climate risky stranded assets, which poses risk to the environment and to financial stability. This also means that we have a wealth of resources to invest in the fight against climate change”.


Co-rapporteur Bas Eickhout (Greens/ALE, NL) said:


“An EU framework for sustainable investments has the potential to shift trillions of investments towards sustainable economic activities and to set a global standard to align financial flows with the climate objectives agreed in Paris. The ECON and ENVI committees addressed green washing of financial products by obliging financial market participants offering green financial products to respect environmental criteria. However, the text needs further improvements in order to ensure that sustainable finance is not limited to a niche of green investors. We also need more immediate EU action to identify and take policy action against the most environmentally harmful investments and ensure that sustainable investments also includes respect for human rights”.


The adopted text says the following sustainability objectives should be considered when evaluating the degree of sustainability of an economic activity:

  • climate change mitigation and adaptation;
  • sustainable use and protection of water and marine resources;
  • transition to a circular economy, including waste prevention and increasing the uptake of secondary raw materials;
  • pollution prevention and control; and
  • protection of biodiversity and healthy ecosystems, and restoration of degraded ecosystems.

These objectives shall be measured by harmonised indicators, life cycle analysis and scientific criteria, and be fulfilled ensuring they are up to scale to the upcoming environmental challenges.


Multi-stakeholders platform


The European Commission should lay down calibrated technical screening criteria and a set of harmonised indicators for the different economic activities, based on the input of a multi-stakeholders Platform on Sustainable Finance.


Impact assessment by 2022


By 31 December 2021, the Commission should conduct an impact assessment on the consequences and the need of revising the regulation to include compliance with other minimum safeguards to establish that an economic activity is environmentally sustainable, MEPs agreed.


Next steps


The proposal will now need to be confirmed by a plenary vote, which should take place during the March II session (25-28) in Strasbourg. The Council is yet to adopt its position.


Background


Currently member states differ in their interpretations as to what counts as sustainable investment. National labels based on different criteria make it difficult for investors to compare green investment, thus discouraging them from investing cross borders. Existing divergences are also a burden on economic operators having to comply with different standards in different Member States.


This proposal is part of a package of three measures presented by the European Commission in May 2018 as a follow-up to its EU Action Plan on Sustainable Finance.