EU member states on Wednesday failed to approve a major green finance reform that if passed would have huge effects on stimulating sustainable investment worldwide.
The European Union is rushing to draw up this so-called taxonomy of green financing designed to clearly mark out what investments can count as good for the environment.
The impact of the EU norms on sustainable financing would be huge, with Europe likely to set the global standard against so-called “green-washing” on Wall Street.
Sustainable finance racked up almost half a trillion dollars of deals worldwide in 2019, according to Bloomberg.
This new classification system will determine whether or not an economic activity is recognised as environmentally sustainable, which would allow it to qualify for subsidies or tax exemptions.
“Several member states expressed concern on the compromise, (with) no majority to support it,” an EU official told AFP.
Negotiators from Finland, who are leading the talks, “will work on a few changes to the text and bring it back to envoys on Monday,” the official added.
The failure to pass the law is embarrassing as it falls on the same day that the commission, the EU’s executive, announced an ambitious “Green New Deal” to fight climate change.
The resistance to the new classification was led by France — backed by eastern Europeans — which is furious that nuclear energy has been denied full green investment status in the proposal.
The compromise by Finland, which holds the EU’s rotating presidency, was reached behind closed doors with MEPs on December 5, but insiders had warned it would face member state resistance.
Bas Eickhout, a Green MEP from the Netherlands who led negotiations for the European Parliament told the Financial Times resistance from member states is “highly irresponsible”.
This was especially so “in the midst of climate negotiations in Madrid where the world is eager to see what Europe is doing on sustainable finance.”