EU not leading by example on green investing, auditors say

BRUSSELS (Reuters) – The European Union is not doing enough to steer its own spending away from polluting activities or to mobilise private funds for green investments, the European Court of Auditors (ECA) said on Monday.

FILE PHOTO: European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium May 5, 2021. REUTERS/Yves Herman

The EU is revamping its financial regulations to help raise money for projects that support its climate change targets, including through its “taxonomy”, a complex new rule book to tell investors which activities are truly green.

While the EU executive Commission’s proposals will make clearer which activities are sustainable, the ECA said in a report, they do not do enough to discourage investments that harm the climate.

“Unsustainable activities are still too profitable,” said ECA member Eva Lindstroem, who led the report.

The European Commission did not immediately respond to a request for comment.

The EU’s sustainable finance taxonomy has triggered a battle between its member states, who disagree on which investments should be labelled “green”.

Brussels has delayed until later this year a politically sensitive decision on whether gas and nuclear energy will be included in the rules. The Commission’s advisers have said gas power plants should not be considered sustainable, and have raised some concerns about nuclear energy.

Lindstroem said a taxonomy that deviates too far from experts’ recommendations could lose credibility.

The auditors said the EU was not practising what it preaches on green finance since its own budget supports some polluting activities.

Parts of the EU budget can be spent on infrastructure for natural gas, a fossil fuel, while most EU spending programmes do not require individual investments to be screened against strict enough environmental standards, the auditors said.

“In practice, this means that the EU funds harmful activities,” Lindstroem said.

The auditors recommended that the EU apply consistent sustainability criteria across its budget – such as the “do no significant harm” principle from its taxonomy, which analyses whether an investment undermines EU climate change goals.

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