NGOs Call for EU Taxonomy to Follow Science
Political considerations and corporate lobbying must not supersede climate and environmental evidence, the WWF insists.
A coalition of NGOs has unveiled initial efforts to more closely align the EU Taxonomy with scientific evidence and criteria.
The taxonomy lists around 140 economic activities that can be considered sustainable under six environmental categories: climate mitigation, climate adaptation; protection of marine and water resources; transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity.
Roughly 11,000 companies have already used the taxonomy for their reporting, with its remit due to be expanded over time to cover the likes of multinational companies with operations in the EU.
But a group of NGOs has now voiced concerns that not all criteria and guidance listed in the taxonomy are fully aligned with science.
Officially launched in 2023, the Independent Science Based Taxonomy (ISBT) has released an initial review scoring the criteria, and making recommendations where materials lacked solid scientific evidence.
“The European Commission and Platform on Sustainable Finance (PSF) are doing good work – and we are happy with the framework overall – we’re just trying to complement their efforts,” Vedran Kordic, EU Taxonomy Coordinator at the World Wide Fund for Nature (WWF) EU, told ESG Investor. “We want this initiative to be positive, technical and science-based, so it can help inform future reviews of the taxonomy criteria, as we expect the EU will be taking another look at it soon – in line with its commitment to review every three years.”
On the use of chemicals, for example, the ISBT challenged the taxonomy’s allowance of hazardous substances being present in concentrations up to 0.1% weight by weight, calling for a more stringent limit of 0.01%. “This […] aligns better with the aim of supporting ecologically sustainable activities and provides a higher level of protection for the environment and human health,” the ISBT said.
The coalition of NGOs is still making its way through all the economic activities included in the taxonomy. Going forward, the NGOs plan to propose qualifying activities for additional sectors, such as aquaculture, and to eventually extend the taxonomy to all sectors and introduce a traffic light system: green for sustainable activities, amber for activities that operate between ‘significantly harmful’ and ‘substantial contribution’ performance levels, and red for harmful activities.
Climate Bonds Initiative (CBI) CEO Sean Kidney, however, countered the group’s argument that the current iteration of the taxonomy was not fully science-based.
“That’s what we have been ensuring for the past six years, as a member of the PSF,” he said. “But of course there are arguments about boundary issues and how to ensure the rules have an impact. This is complicated stuff.”
Defining the green landscape
With more than 60 taxonomies currently under development around the world, it’s pivotal for the EU Taxonomy – the original and most well-known framework – to be as robust as possible.
“The UK is developing a taxonomy, and so are Canada and Kenya – but many are using the EU’s framework to inform their own,” said Kordic. “These other jurisdictions can also look at our work.”
But beyond using the EU text as guidance, taxonomies should also be aligned with the specific needs and context of the country they are developed in.
“Inevitably, there is a need to tailor taxonomies for particular countries – even though the frameworks and features are essentially the same,” noted Kidney. “Colombia’s taxonomy, for example, has a large section on land-use and nature. Europe’s has nothing [on that], because member states weren’t able to agree on adopting the expert committee’s recommendations.”
Some sort of interoperability tool would also be useful to help investors pick the best among existing taxonomy guidance, Kidney suggested. This was one of the motivations underpinning the CBI’s recent launch of a taxonomies-focused initiative alongside the Principles for Responsible Investment (PRI) and the UN Environment Programme Finance Initiative (UNEP FI).
The ISBT recently highlighted the ongoing risk that existing taxonomies were influenced by political considerations and corporate lobbying, rather than strictly following the science.
Lawsuits have also been filed against the European Commission in the European Court of Justice, following a decision to label fossil gas and nuclear power as ‘green’ under the taxonomy – something NGOs deemed to be influenced by lobbying companies.
Back in 2022, five environmental and consumer NGOs decided to leave the PSF, citing a lack of independence. BEUC, Birdlife, ECOS, T&E and WWF all said that the commission “interfered politically” in the group – thereby acting against its recommendations and overriding a legal obligation to follow science-based advice.
“The EU Taxonomy could be paradigm shifting if it is truly science-based,” Kordic argued, while Kidney insisted on the importance of establishing an interoperable environmental taxonomy to incentivise investment.
“Markets can achieve scale when they are standardised – standardising definitions is key to the growth of green markets and the flow of funds to Paris-aligned investments,” Kidney said. “A national taxonomy is the first step to this, which is why this evolution is positive. Now, the work is to enhance standardisation across borders.”
The post NGOs Call for EU Taxonomy to Follow Science appeared first on ESG Investor.