While the EU is aiming to boost eco-friendly investment, it first needs to define what exactly that means.
In a bid to do just that, new rules are in the making that will describe what activities qualify as green or sustainable, in order to establish a common framework for all member states. A single classification system with clear criteria is essential to provide business and investors with clarity and encourage an increase in private sector funding for the transition towards climate neutrality. Such a system would also discourage “greenwashing” projects that claim to be green, but that, in reality, are not.
Some EU countries have already started developing classification systems, but companies seeking funding and investors interested in supporting sustainable projects stand to benefit from common EU standards.
The European Commission estimates that Europe needs about €260 billion in extra investment every year over the next decade if the Green Deal’s zero net emissions goal by 2025 is to be met. Public investment will not suffice, hence private investors will have to step in to finance climate-friendly projects.
Some six environmental objectives have been set. These include climate change mitigation; climate change adaptation; the sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; and, lastly, protection and restoration of biodiversity and ecosystems.
Activities contributing to any of these – without significantly harming the others - may be considered environmentally sustainable.
This “do no harm” principle will ensure that an economic activity causing more damage to the environment than creating benefits cannot be classified as sustainable.
MEPs will vote on the proposed framework during the June plenary session.
Once the rules have been adopted, the European Commission will develop technical criteria for each objective.
These should be ready by the end of 2020 for climate change mitigation and adaptation. The deadline is the end of 2021 for the other objectives.