A unified taxonomy would make it possible to determine which investments, which include loans,stocks and bonds are environmentally sustainable, making it easier for market participants to finance these activities and limiting the risk of greenwashing.
Sandrine Dixson-Decleve, Advisory Council member of EIT Climate-KIC, and member of the TEG stated, “More private capital flows need to be oriented towards sustainable investments to close the $231bn gap of additional investments needed to meet the EU’s 2030 targets and 2050 long-term strategy to meet Paris Agreement objectives.”
The taxonomy will lay the foundation for all other measures on sustainable finance. It will help investors, including individuals, invest their money in line with their sustainability preferences and build momentum for climate-friendly investments.
Dixson-Decleve went on to state, “Currently, no common understanding exists. This hampers sustainable investments and increases the risks of ‘greenwashing’, which is the practice of marketing financial products as ‘green’ or more generally ‘sustainable’, when in fact they do not meet the basic environmental standards.”
The ultimate goal remains to develop a system that provides businesses and investors with clarity on which activities are considered sustainable and have the greatest climate mitigation opportunities, so that they take more informed decisions.
A number of workshops to gather technical expertise from interested parties is also envisaged by the Commission.