The European Commission has presented its long-awaited new strategy for 'sustainable investing' in the European Parliament. With this, the EU sets criteria for what is and isn't 'sustainable,' especially with regard to investments in new energy sources.
The new EU strategy also makes it immediately clear to banks and financial institutions which industries will soon be considered 'polluting' or outdated. Because investors now have clearer guidelines on what counts as green and what doesn't, it will, according to the Commission, become much more attractive to put money into green investments.
"This is essential if we want to deploy private money for sustainability and be climate-neutral by 2050," said Valdis Dombrovskis, Vice-President of the European Commission, afterward at a press conference in Strasbourg.
To meet the climate goals of the Paris Agreement, it is necessary for the entire financial sector to participate. Investors want to know where they stand. Dutch Member of the European Parliament Paul Tang (S&D, PvdA) welcomes that the European Commission now recognizes this and is submitting legislative proposals for it.
Together with the strategy, Commissioner Dombrovskis also introduced an EU standard for green bonds. This allows companies and countries to specifically raise money for investments in green and climate-friendly businesses.
Paul Tang: “This standard provides companies and countries with an additional tool to make the transition to a sustainable economy and makes it easier for investors to deploy their money sustainably.”
Investments in fossil fuels carry many risks. Not only do they contribute to global warming, but they also risk losing their value. Scientists indicate that to meet the obligations of the Paris Agreement, fossil fuels can only be used for another 10 to 15 years.
As governments are making significant efforts toward transitioning to a sustainable economy, this means that investments in oil and gas fields or refineries will rapidly lose value. The large Dutch pension fund ABP still invests more than €15 billion in fossil fuels, and ING Bank had nearly €4 billion invested in the sector.