The decision of the European Parliament to include certain activities in nuclear plants and gas plants in the classification of green investments will have consequences in the configuration of the funds considered sustainable. Consumer associations, environmental organizations and ethical banking criticize the change in taxonomy. They argue that it will confuse retail investors and encourage financial greenwashing, a term coined to refer to supposedly sustainable investments that in reality are not.
If this change in the European taxonomy comes into force, the Association of Financial Users (Asufin) warns that the “misleading” marketing of these two types of energy as green will be facilitated. He also fears it will increase consumers’ exposure to assets “that are locked in the future”, for example, by decommissioning gas-fired plants to meet climate targets.
The inclusion, with certain conditions and temporarily, of nuclear energy and gas as sustainable aims to broaden the range of financing for this type of project. A need exacerbated by the tension in the prices of raw materials and the Russian threat of a cut in the gas supply.
In this context, the modification of the taxonomy regulation of the European Union (EU) will foreseeably affect sustainable investment products, which have experienced a considerable boom in recent years. In Spain, the national funds marketed in April under this label were 23% of the total, with assets of almost 70,000 million. A figure that contrasts with the 28,000 million of March 2021, the date on which registered sustainable funds only represented 9.8% of the total.
Judging by data from the Association of Collective Investment Institutions and Pension Funds (INVERCO), in the last year the growth of this type of product has been substantial. Despite the successive regulations approved in the European framework, the director of Studies and Statistics of the association, José Luis Manrique, acknowledges that “there is a problem of clearly defining what a sustainable investment is.” In this sense, he explains that although the Disclosure Regulation (SFDR) requires disclosing the degree of sustainability of each financial product and meeting a series of requirements, the approval of the regulatory technical standards (RTS, in its acronym) is still pending. in English), key for entities to properly implement the regulation.
In the absence of this regulation that develops the specific characteristics of sustainable investment, “there is probably a certain dispersion among the regulators”, adds Manrique, although he sees the criteria followed by the National Securities Market Commission (CNMV) as “quite reasonable”. when interpreting the community regulation.
Another relevant aspect is how the large investment managers will react to the green classification of certain activities related to nuclear energy and natural gas. Silvia García-Castaño, general director of investments and products at Tressis, clarifies that this change in taxonomy does not mean “that the funds are going to buy these energies en masse”, although she acknowledges that the legislative amendment introduces a greater degree of permissiveness. Fundamentally, it will depend on “the policy of exclusions” – in which coal and nuclear power usually figure – and “how the investments that contribute most to sustainability are selected”, she argues. In this regard, she recalls that Articles 8 and 9 of the Disclosure Regulation require demonstrating that the investment has a positive impact on environmental, social or governance objectives. “A philosophy that has not changed despite the inclusion of gas and nuclear as green energies,” she says.
Despite this, the commitment to recognize this type of investment as climate-friendly has generated great discomfort, not only among environmental activists, but also among consumer organizations. The person in charge of studies at Asufin, Antonio Luis Gallardo, warns that “the prospection of the informative brochures that accompany this type of investment is very complicated, unless the product is very well specified.”
The manager of savings and investment products at Triodos Bank Spain expresses herself along the same lines. Cristina Martinez Salas argues that the proposal to consider gas and nuclear energy as environmentally sustainable activities “generates confusion”. In her opinion, she “promotes financial greenwashing” because these two types of energy “could be present in any sustainable product and it will be difficult to identify them.”
As a result of this change, it is logical that many consumers consider how they will be able to differentiate from 2023, the year in which the new taxonomy will come into force, if the sustainable investment products to which they have decided to allocate their money are really respectful of environment. “Hence the importance of a rigorous and unambiguous classification that taxonomy should provide,” added Martínez.
The credibility of the products marketed under a green label therefore depends on achieving clear and homogeneous regulations from regulators and suppliers. The best antidote against “greenwashing” or greenwashing that the European Commission says it wants to avoid with its controversial decision.
