|That is where the EU Commission’s new TR comes in. The regulation aims to finally put to bed the thorny issue of what constitutes a truly ‘green’ investment.
Its goal is to create the world’s first-ever “green list” of sustainable economic activities, or taxonomy, based on the best scientific knowledge at our disposal.
The EU reached an agreement on its ‘green’ taxonomy in December 2019, but the details of the delegated acts, of which EURACTIV has been privy to a draft version, are still being hashed out.
To qualify as ‘green’ under the EU Taxonomy, a business activity must be proven to substantially support at least one of the six identified areas. These include climate mitigation and adaption, sustainable water use, circular economy, pollution prevention and control, and biodiversity.
Crucially, they must also do so without doing any “significant harm” to any other criteria, all the while in compliance with minimum social safeguards laid out in existing conventions and UN guidelines.
The establishment of harmonised green criteria will then help investors determine which economic activities can be considered environmentally sustainable, thus navigating the transition to a low-carbon, resilient and resource-efficient economy.
As it stands, asset managers are free to define what is ‘green’, leaving the term wide open for interpretation.
Without a clear legal framework, this ambiguity has led to the financial backing for all kinds of practices which have been washed with every shade of green.
But what does the TR hold for the thorny areas of agriculture, biodiversity, and climate change?
The TR recognises the potential of both perennial and non-perennial crops, as well as livestock, as the agriculture sector’s activities with the potential to offer a substantial contribution to the six main environmental objectives set out by the regulation.
“The agriculture sector currently emits high levels of greenhouse gases and can therefore play a central role in climate change mitigation,” it reads, adding that 10% of the EU’s greenhouse gas emissions are attributed to the agricultural sector.
However, it also highlights that in addition to its potential to reduce its own greenhouse gas emissions, the agricultural sector can also act as a carbon sink.
The technical screening criteria are therefore designed to reflect this dual role of the sector, as both a foe and friend of climate change.
Addressing the ‘cow’ in the room, the TR highlights that the livestock sector can offer contributions towards climate change mitigation and adaptation, provided it complies with certain conditions.
This includes caveats such as the fact that livestock is not raised on high carbon stock from land-use change, e.g. on land which was previously forested or on peatlands.
It also stresses the importance of good herd management and feeding practices, including the sustainable procurement of feed, especially those with large potential upstream impacts, including soya and palm-oil based feeds.
One area where it highlights livestock’s contribution is in the management and maintenance of permanent grassland, which crops up multiple times in the draft.
The Commission is due to publish a draft of the TR’s delegated acts in the coming days, followed by a four-week consultation before officially making the proposal by 31 December.