Issue link: https://maltatoday.uberflip.com/i/1198602
09.01.2020 11 INTERVIEW taxonomy How does the taxonomy work? An economic activity should con- tribute towards one or more of the above objectives and not significant- ly harm any of them, says the agree- ment. Its environmental sustainability should be measured using a unified classification system, as national la- bels based on different criteria make it difficult for investors to compare green investment, thus discouraging them from investing across borders. The text does not preclude or black- list any specific technologies or sec- tors from green activities, apart from solid fossil fuels, such as coal or lig- nite. Gas, and nuclear energy production are not explicitly excluded from the regulation, however. These activities can potentially be labelled as an ena- bling or transitional activity in full re- spect of the "do not significant harm" principle. The new legislation should also pro- tect investors from risks of 'green- washing' as it makes it compulsory to provide a detailed description of how the investment meets the environ- mental objectives. You are the rapporteur for the technical expert group ... so what is the TEG? And how does Europe write new rules like this? TEG is a group of investors, banks, taxonomy developers and scientists. Our role is technical -- to say what level of performance on emissions or energy intensity is green enough to be consistent with the Paris Climate Agreement and specifically, a net zero emissions economy in 2050. We have developed criteria for 67 economic activities so far, across electricity, manufacturing, transport, agriculture, buildings, forestry sec- tors and more. We've also developed criteria for climate adaptation. To do this work, we had input from over 200 additional industry experts and have conducted two consulta- tions with over 1,000 responses. Our technical input will form the ba- sis of a new regulation, which requires disclosures by investment funds. The TEG recommends the activities and performance criteria, the European Parliament, the EU Member States and the European Commission ne- gotiate the disclosure obligations for investors and make it law. What are the next steps to getting the rules in place? What is the time line? The regulatory negotiation is un- derway now and we expect a result by early in 2020. The disclosure obli- gation will likely start within 2021 or 2022. But investors are already using our recommended taxonomy criteria to see if their investments are green. The TEG report can be downloaded from the EU Commission website. What has been the feedback from industry participants? Where are the biggest debates? We've had excellent and detailed responses from industry. Many in in- dustry want the taxonomy to reflect existing regulations on energy effi- ciency and emissions performance. The problem here is that few ex- isting regulations are aligned with future climate goals -- which is why investors need a green taxonomy. There are also requests to call mod- est reductions in emissions intensive sectors partially green. TEG takes the view that small emis- sions reductions today, although wel- come, can lock in assets with high emission profiles for the long term. This can do more harm than good to environmental objectives. Telling the market an activity is green today, then saying it under- mines environmental objectives in a few years' time, is something we should avoid. Will the taxonomy have a global impact or will it be limited to Europe? Investors in Europe want green in- vestment opportunities. They can see government policy, technology process and consumer preferences on environmental issues shifting. Companies that operate globally and have a green story to tell can use the taxonomy to communicate with pro- spective investors. Other countries globally will want taxonomies too. Having an activity classified green to attract support and green capital is a substantial prize. The taxonomy is set to underpin a new EU green bond standard. Do you expect that to tighten the rules on green bonds and help eliminate "greenwashing"? The new Green Bonds Standard will require that the underlying invest- ments meet the Taxonomy criteria. Those who want clear assurance that their investment is aligned with long-term environmental objectives like the Paris Agreement, can use the Green Bonds Standard to be sure.