The Institute for European Environmental Policy (IEEP), a “green think tank”, has raised concerns over the EU’s classification system for sustainable finance, saying policymakers were trying to “sneak in”& biodiverisity offsetting.
The European Commission has presented new criteria to add to the EU action plan for sustainable growth, which aims to reorientate private capital to sustainable investments and encourage investment decisions to consider ESG factors.
The amended criteria has set performance standards and outlines new technical screening criteria for economic activities that contribute to environmental objectives.
In particular, the IEEP has criticised the biodiversity criteria for failing to address essential sectors that require support to facilitate the transition to a more sustainable future.
The proposed rules state that conservation activity does not “only” serve the purpose of offsetting the impact of another economic activity. However, IEEP objects to the European Commission’s use of the word ‘only’, arguing it “fundamentally changes the objective”‘.
The current criteria allow investment decisions to justify biodiversity offsetting as a substantial contribution to the protection of biodiversity and ecosystems – but IEEP says investment decisions should not be encouraged to offset biodiversity activity and should focus on doing no significant harm to biodiversity.
IEEP has recommended the text be amended to: “The conservation activity is not implemented with the purpose of offsetting the impact of another economic activity.”
The IEEP’s scrutiny adds to further criticisms of the EU’s regulation for sustainable finance.
In February, the French regulator AMF urged European policymakers to create a benchmark for Article 8 and Article 9 products under the Sustainable Finance Disclosure Regulation (SFDR). The European Commission later issued amendments to the SFDR to clarify the classification of investment products as Article 8 or Article 9 funds.
The European Fund and Asset Management Association has also criticised the “lack of clarity” in the European Securities and Markets Authority’s fund naming guidance for sustainable funds.
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