After tense moments in the Council, member states and European Parliament negotiators endorsed last night the political compromise on the world's first standard for sustainable financial products. This unified classification system, the so-called taxonomy, is setting harmonised criteria to determine whether an economic activity is environmentally sustainable. It is the last and most important third-pillar of the sustainable finance package. For the Socialists and Democrats, this taxonomy is a crucial instrument for a just transition towards a sustainable economy and society in which no one is left behind. With this endorsement, the political compromise reached on December 5th has, after an initial rejection by member states, finally been confirmed. Some cosmetic changes to the text were sufficient for a qualified majority in Council to be found.
Paul Tang, MEP and S&D negotiator on taxonomy, said:
“Last night, Parliament and Council endorsed the political agreement on setting the world's first gold standards for private investments. This will unleash billions of Euros to fight the climate emergency and forms the cornerstone of the European Green Deal. We fought and won the battle for including the ‘do no significant harm to social objectives’ principle. Now, products will only be considered sustainable when they don't harm social objectives such as equality, social cohesion, social integration and good labour relations. To give you a concrete example: an electric car, whose battery was produced by child labour, cannot be labelled sustainable.
“We also succeeded in considerably stepping up corporate obligations. Companies and banks will have to declare both how much of their total turnover is derived from environmentally sustainable activities and how much they are investing in sustainability. Sustainability can no longer be an after-thought for companies but must be at the core of their business plan.
“Our goal is to make money work for the people and the planet. Today's deal is a big step towards a sustainable Europe that leaves no one behind.”
Simona Bonafè, MEP and S&D negotiator on taxonomy, said:
“To combat the climate emergency, Europe needs at least 180 billion additional investments in renewables and energy efficiency every year. Mobilising private capital for sustainable investment in all economic sectors is crucial for our future. We want to make the finance industry take on more responsibility, really shift money towards more sustainable projects and not let them get away with greenwashing attempts. The new gold standards will allow investors to make sound decisions and throw their weight into the fight against the climate emergency.
“We succeeded in clearly excluding any activity involving solid fossil fuels from ever being labelled as sustainable. Furthermore, we succeeded in ensuring that all technical screening criteria and thresholds to identify sustainable economic activities will be defined and approved under the scrutiny of the Parliament, allowing us to have our final say on the level of ambition of the taxonomy framework. It is indeed also good news that we could include safeguards on waste in this regulation. No economic activity will be considered environmentally sustainable where the long term disposal of waste may cause significant and long term harm to the environment.”
