EU negotiators are agreeing a compromise on its ‘green finance’ regulation – the rules for which financial investments can be labelled environmentally sustainable.

The extremely contentious negotiations have resulted in a robust compromise brokered by Finland that creates a strong regulation. The regulation sets a legal framework for the EU’s taxonomy of environmentally sustainable activities to be based on scientific evidence rather than political compromises.

In particular, the scope of the regulation has been extended to all investments and includes extending the requirement to disclose how green investments are according to the new EU green standards to the issuers of bonds and to listed companies, alleviating the paperwork burden originally placed only on fund managers.

Also ‘transitioning’ activities – businesses that are not currently green – and ‘enabling’ activities (such as the production of steel for train tracks) have been differentiated from ‘green’ ones so that there can be no confusion for consumers.

When the EU’s climate taxonomies are published in 2020, the regulations will provide a comprehensive framework, as long as the compromise is approved by member states’ ambassadors next week.

Welcoming the move, William Todts, executive director at environmental group Transport & Environment's (T&E), said: “Today the negotiators heeded more than 120,000 citizens who told them to stand firm against greenwashing in financial services. The EU’s green standard will mean people can no longer be sold fake green investments. If we want to halt climate change we need money to be flowing towards good things such as electric mobility or hydrogen and not towards diesel, gas and dirty biofuels.”

Once the regulation is formally approved, the actual list of environmentally sustainable activities will be drawn up by the Commission based on recommendations from a newly formed Sustainable Finance Platform – a group of experts made up of NGOs, financial market companies and EU agencies.

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