The EU Regulation on sustainable finance taxonomy aims at setting standards to encourage investments in green and sustainable production. According to the Finnish Industries (EK), Europe must now work to ensure that energy sustainability is assessed in a technology-neutral way, based on genuine climate impact. We are worried that, for example, nuclear power, hydropower, and forest-based biomass are not treated fairly in this regard.
The Taxonomy Regulation ties availability and cost of funding to the environmental impact of the investment project in question.
Jyri Häkämies, Director General of the Confederation of Finnish Industries, underlines that the ongoing taxonomy reform is a big leap in the implementation of climate goals:
“Connecting climate ambitions to investment funding will provide an unprecedented opportunity to truly achieve the climate goals of the next decades. It is quite right that low-emission companies can gain a competitive advantage over those with a negative climate impact. Even more so, it’s important to define the technical criteria correctly.”
The Taxonomy Regulation will be applied as early as 2022. In the first phase, it is expected to apply for capital market investments targeting listed companies, credit institutions and insurance companies that employ more than 500 people.
At the same time, a reform obliging banks and financial institutions to disclose information on the sustainability of their loan portfolios and investments is being prepared by the European Commission. This will be reflected on all companies receiving funding – including SMEs. Eventually companies will presumably have to produce responsibility reporting alongside financial statements.
Defining sustainability is critical
The Commission is expected to adopt the technical criteria (TSC) for the EU’s Taxonomy Regulation on 21 April. The taxonomy, i.e., classification system for corporate investments is essential as it is the basis for assessing the sustainability of investments when it comes to their climate impact.
From Finland’s point of view, there is a significant concern that our key low-emission energy sources – such as nuclear power, hydropower, biomass – are classified as less sustainable energy on the taxonomy scale. It would most likely lead to an increase in the energy costs of our industrial companies. In addition, it could be more difficult or more expensive for companies outside the criteria to obtain financing for their investments.
This would be a huge setback for sustainable Finnish industry and exports, says Häkämies:
“Finnish companies are ranked among the most sustainable in the world by many indicators. This should also be reflected in their ranking on the EU sustainability scale. Otherwise, the Finnish cutting-edge climate investments risk to stagnate. This would mean the climate goals escaping even further, with the transition to a carbon-neutral society jeopardized.”
The Commission’s draft proposal has now been submitted to the Member States for first round of comments ahead of the Commission adoption of the renewed criteria on 21 April. The Council and the European Parliament are expected to finally adopt the new Taxonomy Regulation by the summer.
“It is essential to remember the goal of the whole reform: to reduce climate emissions. It is thus important to make sure that the legislation is technology neutral when it comes to treatment of different energy sources. The sustainability criteria must be based on genuine climate impact”, Häkämies stresses.