EU’s Environmental Footprint Ambitions: Chasing Private Money to Boost Green Economy

Written by | Monday, May 28th, 2018

The European Commission wants to boost private investment in low-carbon technologies and increase transparency in sustainable and green finance to avoid the so-called “green-washing”. The EU would like to engage the private sector in order to decarbonize the European economy and meet objectives of the Paris Agreement on climate change. “Meeting our climate commitments will require large scale investments. For Europe alone, we need an estimated €180 billion of additional investment every year until 2030,” commented  Valdis Dombrovskis, the European Commission Vice-president in charge of Financial Stability. Jyrki Katainen, Commissioner for Jobs, Growth, Investment and Competitiveness added that since no public authority had this money, capital needed to be raised from private sources “in favor of our planet”.

In order to attract private money, the European Union came up with an EU-wide classification system that will gauge whether an economic activity in a given sector is environmentally friendly. The new taxonomy system will provide a common definition of what is green and what is not. The new regulation will also seek to ensure that investors make their decision in the ecological footprint. The Commission also suggested creating two new categories of benchmarks; a “low-carbon benchmark”, which is a “decarbonized” version of standard indices, and a “positive-carbon impact benchmark”, synching investments with the Paris Agreement objective of limiting global warming to below 2° C.

The EU’s plan to support green economy has been welcome by environmentalists and civil society players. The World Wildlife Fund (WWF) has been especially supportive of the new legislation. The WWF, an international non-governmental organization working in the field of the wilderness preservation, and the reduction of human impact on the environment, said that the new regulation would boost the market for sustainable finance, despite some limitations. WWF’s economist Sebastian Godinot commented that the ball was now in the court of the EU Parliament and member states “to support, strengthen and turn the planned laws into a tool for consumers to re-direct their money into sustainable assets and avoid those which harm the planet.”

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