The EU’s actions on sustainable finance will not be fully effective unless additional measures are taken to price in the environmental and social costs of unsustainable activities, says the European Court of Auditors in a report on sustainable finance published on Monday 20 September.
“Unsustainable business is still too profitable”, Eva Lindström, the member of the Court of Auditors responsible for the report, told some journalists. One of the main problems identified in European sustainable finance policy is that the cost of products and services does not sufficiently reflect their environmental and climate impact. The Court therefore recommends that steps be taken by the end of 2022 to put a price on carbon.
European auditors give a positive assessment of the Commission’s 2018 Action Plan for Financing Sustainable Growth, which was reviewed in July (see EUROPE 12756/15). Nevertheless, they believe that the measures included, mainly focused on investor reporting and transparency, should be completed, especially the implementation of the European taxonomy.
“The issue of reporting is important to avoid greenwashing”, said Ms Lindström, also questioning the auditing of this phenomenon of labelling assets or projects as ‘sustainable’ when they are not. On the taxonomy, she described as “worrying” the delay in finalising this nomenclature due to considerations that have become political in relation to the gas and nuclear issue and at a time when the urgency of climate change requires a response from the financial markets. For Ms Lindström, the experts’ advice should be followed in order to establish “the credibility of the whole process”.
The Commission is due to present by the end of 2021 a complementary delegated act on taxonomy that will address the nuclear issue (see EUROPE 12764/12).
The Court of Auditors also notes that, with the notable exception of the InvestEU programme, the mobilisation of the EU budget for environmentally and socially sustainable activities is insufficiently based on clear and precise criteria. It therefore recommends that the ‘do no significant harm’ principle and the EU taxonomy be applied to the entire EU budget, as well as to the Next Generation EU Recovery Plan.
The important role of the European Investment Bank (EIB) in European sustainable finance policy is also highlighted. According to Lindström, the investments co-financed by the EFSI, the financial arm of the Juncker investment plan, are not focused enough where the needs are greatest, “in Central and Eastern Europe”. And the investments made are too much on mitigation and too little on adaptation to climate change. In response, the Court recommends setting up an online platform or ‘pipeline’ of sustainable projects seeking private investors.
See the report: https://bit.ly/2Xziyic (Original version in French by Mathieu Bion)