Financing A majority of the government would overturn the environmental rating of EU investments – that would be what it would mean

Banks and investors assess the environmental impact of companies without EU rules. Still, common criteria are also needed.

EU the attempt to create an environmental classification for investment targets has run into a fierce opposition. Austria is already threatening the European Court of Justice if nuclear power is counted as a climate solution, and Finland and Sweden are voting against the proposal, mainly because of guidelines for forest management.

Although the collapse of the entire performance seems unlikely, it is appropriate to ask what would happen if Finland’s position won and the performance collapsed.

Hardly nothing very dramatic, say the financial professionals interviewed by HS.

It is the taxonomy that is being created to meet the needs of the financial sector. The aim is to channel private capital to climate-sustainable sites by agreeing on common criteria for climate-friendly activities.

Although the common EU criteria are seen as useful in their own right, industry points out that there is already a situation in the capital markets where investors are feverishly looking for green investments and that banks and other financial institutions spend a lot of time and effort assessing the environmental impact of investments.

“Regulation comes in the aftermath. Even without regulation, capital strives for green targets, ”says S-Bank’s Investment Director Mika Leskinen.

Mika Leskinen, Investment Director of S Bank

Nordean Head of the Nordic Responsibility Team Veronica Palmgren sees an EU classification as necessary and says that its downfall would be a loss. He believes that a common set of environmental criteria would bring at least three major benefits.

Veronica Palmgren

Firstly, uniform environmental criteria would eliminate the risk of green washing, ie uncovered environmental claims. This affects, for example, consumer marketing of investment products.

Another big benefit would come from the reporting obligation contained in the legislation. In the future, large companies will have to report which part of their business meets the EU’s green criteria. Today, the lack of comparable data is a big problem in the financial sector.

“Based on public information at the moment, it’s not always possible to judge how green a company is,” Palmgren says.

The third benefit, he said, is that EU taxonomy is setting the “green path” for the most emitting industries. For example, the classification defines what constitutes climate-sustainable steel production or the chemical industry, and virtually no company currently meets these targets. This does not mean that companies in the sector could not benefit from the rating: instead, companies could be given the green stamp, for example, for investments that significantly help them to reduce their emissions.

Palmgren believes this will help financiers and businesses direct their money to the right destinations.

Government The Commission justified its opposition to the Commission ‘s proposal on the grounds that the criteria might make it more difficult to obtain funding for the forestry sector in the future if all Finnish forestry did not receive the green stamp. According to experts interviewed by HS, it is still difficult to assess how the EU’s environmental classification will ultimately affect, for example, access to finance or prices.

“No one yet knows what the ultimate impact would be,” says Evli’s Chief Sustainability Officer Outi Helenius.

Evli’s Corporate Responsibility Director Outi Helenius.

As such, the idea of ​​favoring green targets in the financial markets is not new, it is being done every day now. There is a great deal of interest from investors and financiers in green targets. At the same time, for example, certain fossil investments are being excluded from funding.

“Activities that move toward a low-carbon future involve less future risk and are an attractive target for financing,” says Palmgren.

Much depends on the extent to which the financial industry takes advantage of taxonomy. However, the regulation does not, for example, prohibit funding for sites outside the taxonomy. There are also many industries that are not covered by the entire classification.

Helenius considers it clear that donors do not base their decisions solely on EU criteria. At least initially, regulation will only cover certain sectors relevant to climate change and will focus on climate impacts.

“Responsibility or sustainability is so much more. Investors monitor it as one metric, ”says Helenius.

A big question mark is also how the taxonomy might swim into other regulations. Leskinen considers it possible that the European Investment Bank and other public financial institutions will find it more difficult to finance non-green projects in the future. There is also speculation in the industry as to whether green loans will be favored in bank solvency regulation, which would have a big impact.

Also Helenius says the collapse of EU taxonomy would be a shame.

“We need climate finance now. It would help everyone if we could agree on common rules. ”

S-bank’s Leskinen, on the other hand, does not believe that the collapse of the EU taxonomy would have any effect on S-bank’s investment activities.

“We would continue to look for interesting companies that solve environmental problems, as before.”

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