Investor group challenges EU taxonomy updates

January 14, 2021

The Institutional Investors Group on Climate Change (IIGCC) has warned against gas being included in the EU’s sustainable finance taxonomy, claiming the move by the bloc is incompatible with its commitment to carbon neutrality by 2050.

In an open letter to EU member states and MEPs, the group called for gas to be excluded from the taxonomy.

“As the cornerstone of the EU’s sustainable finance agenda, the inclusion of gas would undermine the credibility of the taxonomy as well as the EU’s own commitment to climate neutrality by 2050. While there is a place for gas as a short-term bridge as part of a period of transition, it cannot honestly be classified as green,” said Stephanie Pfeifer, CEO of the IIGCC.

The EU Commission has already attracted substantial criticism for including nuclear energy in the taxonomy. Last week, both Austria and Germany came out against the idea, with Austria threatening to sue the European Commission if it decided to go ahead with its plans.

Meanwhile, the UK's Financial Conduct Authority (FCA) has closed the consultation period for the UK’s own sustainable finance taxonomy. The industry has responded to the financial watchdog’s discussion paper, with some stating that “demanding standards” should be set for any funds that use the ESG label to ensure success.

In its response, the UK Sustainable Investment and Finance Association (UKSIF) acknowledged the ongoing issues with the EU’s taxonomy.

The financial services body said the UK would need to address certain issues, such as the prescriptive criteria for determining green activities, and more recently the likely inclusion of natural gas and nuclear.

“The rigid interpretation of ‘green’ in the EU’s taxonomy, if carried forward in the UK’s taxonomy, will have important implications for determining the thresholds and minimum criteria for each of the product categories,” UKSIF stated.