Full or feeble EU taxonomy: Member States to choose
Posted on 03 July 2019
Germany needs to stop trying to limit the taxonomy's effectiveness
Brussels, Belgium - 3 July 2019
What’s happening? The EU Council is about to finalise its position on the EU taxonomy - a system to classify investments on their degree of sustainability. The taxonomy is on the agenda of the first working party meeting to be held under the new Finnish EU presidency, which is taking place today.
Why does it matter and what does WWF want? We are facing a climate and ecosystem emergency. These necessitate an urgent transformation of the whole EU economy - only around 5% of it is based on activities that are fully sustainable.
WWF is calling for a taxonomy which gives economic activity a ranking from dark green to red, a bit like the Energy Efficiency label you see on fridges. This would help companies to make their business models sustainable and investors to make environmentally sound choices.
The European Commission’s proposal is a good first step. However, it covers only the part of the economy that could be rated ‘dark green’ - that is, fully sustainable. All other activities would be lumped together as “other”, maintaining the confusion on their environmental impact.
What’s more, to make a difference this rating must be publicly available - known as ‘disclosure’. However, Germany is leading a group of countries trying to muddy the waters by removing or delaying the disclosure requirement.
Sébastien Godinot, Economist at WWF European Policy Office said: “If you sat an exam and you were told your results were ‘somewhere between 0 and 95%’, it would be pretty unhelpful for improving your performance. And if the examiners published no results at all, it would be even worse! We need a taxonomy with a range of levels and a disclosure requirement, or it will be of limited use to investors and companies. If we get this right, sustainability will join innovation and price as a key factor in business models and investment processes, transforming our economy for people and planet.”
Germany and its allies need to stop trying to limit the effectiveness of this proposal by blocking disclosure. Instead, Member States should rally behind a fully-fledged, transparent taxonomy which can help revolutionise the EU’s economy and climate action, while cementing the EU as a world champion of sustainable finance”, added Godinot.
Germany and other Member States are attempting to remove the disclosure requirement, or failing that, delay it by introducing an 18-month phase-in period before disclosure becomes mandatory. They argue that the market needs time to adapt but there is already a 13-month period between the publishing of the EU Technical Expert Group (TEG) report, which sets the taxonomy out in detail, and the Commission’s first delegated act on the taxonomy. This is enough time for the market to understand the taxonomy and adapt.