Money makes the world go round. Banks, investment and pension funds, insurance companies, etc, determine how much goes to different companies and thus decide who wins and who loses in the economic ‘race’. Diesel or electric cars? Trains, buses or airplanes? Ultimately it is a matter of the capital made available to a specific technology. It’s how Tesla got off the ground. So, Europe will not transition to a decarbonised economy unless the financial industry steers its funds towards sustainable economic activities. This is why in 2019 T&E started work on sustainable finance.
We helped guide MEPs and governments to agree billions in EU spending on more sustainable projects like electric vehicle re-charging points and public transport under the bloc’s infrastructure budget.
We also focused on private funds. ‘Sustainable’ investment is big business: in 2018 almost 50% of the total managed assets in Europe - up to €12 trillion - were labeled ‘sustainable investing assets’. But to date, there were no rules to govern what type of private investments could be labelled ‘green’. So while banks and other players were offering green funds, there was no way of telling whether they were genuinely green. That’s why T&E and other NGOs moved fast to make sure the European Commission’s new ‘green’ investment list (the taxonomy) wouldn’t be punctured with loopholes by the fossil fuel, transport and financial services lobbies.
As soon as the Commission’s expert group published a draft list of ‘green’ projects, we realised that informing and mobilising the public would be the only way to get a list based on science. The draft marked a good starting point for the taxonomy, listing only cars with zero tailpipe emissions, such as electric and hydrogen vehicles, from 2026. It also excluded airports or any other project promoting aviation. However, it also left the door open to trucks and buses running on biofuels certified as having low indirect emissions. In effect any internal combustion engine vehicle could be declared green once if it was claimed they used biofuels.
To stop lobby groups pushing for loopholes to label fossil fuel vehicles and other dubious ‘green’ investments, T&E assembled a civil society coalition from around the continent. Together with WWF, Greenpeace, BirdLife Europe and others, we mobilised over 130,000 citizens to tell finance ministers and other lawmakers to stop fake ‘green’ investments being included.
Governments attempted to stall for time - requesting a two-year delay - as they worked out their differences. A compromise text negotiated by the Finnish presidency of the EU ambiguously defined ‘transition activities’, which could allow things like fossil gas to be labelled sustainable at a later stage. Germany, Austria and Luxembourg tried to block the vague wording. T&E and its green NGO partners alerted the public, forcing governments to back down.
On the brink
Talks between MEPs, the Commission and governments were on the brink of collapse before Christmas. The European Parliament resisted giving a ‘get out of jail free card’ for the financial sector whereby asset managers would be free from an obligation to disclose the extent to which their “sustainable” products were aligned with the EU’s definition. Furthermore, an attempt was made to politicise the scientific exercise of defining criteria and thresholds for economic activities to be considered aligned with the Paris objectives.
Governments were even willing to derail the law in the final hours of negotiations in order to protect the greenwashing of national industry by the financial sector. Their attempts were so blatant that T&E and others called them out publicly. Just days before Christmas, they were forced to back down and sign-off on a progressive deal: the taxonomy of environmentally sustainable activities would be based on scientific evidence rather than political compromises, and include would disclosure requirements for the financial sector. Furthermore, corporations like Volkswagen and Siemens would also need to disclose the extent to which they’re engaging in economic activities as per the EU’s criteria.
As Brussels shut down for the holidays, T&E was getting warmed up for the next fight: over the actual list of sustainable investments - the so-called climate taxonomies - which must be published before the end of 2020. The Commission will also update the Sustainable Finance Action Plan in autumn, which will determine financial legislation for the coming years. The Commission will establish a Platform for Sustainable Finance in 2020 and T&E will work to ensure there is a strong civil society voice around that table. With uncertain economic times to come, it is fundamental that policies and measures are put in place that allow for truly sustainable finance to flourish.