Wednesday 27 February 2019

EU agrees to create low carbon standards to aid investors

The European Parliament and member states have agreed on a new generation of low carbon benchmarks aimed at helping boost investment in sustainable projects and assets.

An increasing number of investors make investment decisions based on the carbon footprint generated by the projects or assets they consider, using indices that reference or measure the performance of investment portfolios.

However, a wide variety of such indices currently exists, with different objectives and degrees of quality and integrity.

The Parliament and member states have therefore set out two types of financial standards: a climate transition benchmark, which will offer a low carbon alternative to the commonly used benchmarks and a specialised benchmark which brings investment portfolios in line with the Paris Agreement goal to limit global temperature rise to 1.5°C.

They are voluntary labels designed to help investors who wish to adopt a climate-conscious investment strategy and give additional assurances to avoid “greenwashing”, i.e. that investors are deceived by misleading or unsubstantiated claims about the environmental benefits of a benchmark.

A technical expert group will now advise the European Commission on how to select the companies eligible for inclusion in the new benchmarks and whether to exclude certain sectors of economic activity from the specialised Paris-aligned benchmark.

Eugen Teodorovici, Romanian Finance Minister said: “The transition to a low carbon, sustainable economy requires us to rethink how we do business, where we invest our money.

“Thanks to today’s agreement, it will be easier for investors to select climate-conscious projects, infrastructure and technologies, so as to re-orient capital flows towards green assets.”