Thursday, January 06, 2022
Green paint for nuclear energy
Finance industry annoys taxonomy
From Laura Eßlinger
How sustainable is nuclear power? The EU Commission wants to give it a green label. The federal government does not think this is a good idea. And there is also criticism from the financial industry.
On New Year’s Eve, shortly before midnight, the EU Commission sent out a draft for a classification of sustainable financial products. It landed in the mailboxes of the 27 EU member states. The deadline is tight: their governments have to decide by next week how to respond to the proposal.
In essence, it is about the question of which type of business can be described as sustainable and which cannot. The EU Commission proposes to classify nuclear power and natural gas as so-called green energies. That would mean that investment products like funds would get a sustainability stamp even if they invest in controversial technologies such as nuclear power or natural gas.
Environmental groups and many politicians are appalled by the move. Because it would mean indirect funding for modern nuclear and gas power plants. “The proposals of the EU Commission dilute the good label for sustainability”, said Federal Minister of Economics Robert Habeck. “In any case, it is questionable whether this greenwashing will even find acceptance on the financial market.”
The Brussels plan has met with resistance from many fund companies. As early as August, parts of the industry had positioned themselves against the classification of nuclear power as green energy. In an open letter, the organization Forum Sustainable Money Investments (FNG), which represents 200 members, wrote: “In our opinion, categorizing nuclear power as a sustainable economic activity would not help but hinder the achievement of our common goal of promoting sustainable finance.”
“Credibility lost”
Describing nuclear energy as sustainable is a no-go, says Ingo Speich, Head of Corporate Governance and Sustainability at Dekabank, the savings banks’ fund company. “With this taxonomy, the EU Commission is offloading problems such as the disposal of nuclear waste onto future generations,” said Speich about “Capital”. In addition to Deka, Union Investment, GLS Bank and LBBW Bank are also members of FNG. When asked by “Capital”, LBBW was also critical of the EU initiative.
“The taxonomy was politically hijacked,” says Speich. In particular, French President Emmanuel Macron had urged nuclear power to be classified as clean energy. Germany is against the inclusion of nuclear power in the taxonomy, but has campaigned for a green label for gas as a necessary transition technology. “The taxonomy rules are driven by the industrial policy of individual countries. The EU Commission has gambled away credibility,” said Speich. That does not help the actual goals, namely to slow down climate change and make the economy more sustainable.
The classification of economic activities by the EU Commission is intended to help investors switch their investments to more sustainable technologies and companies. This should be an essential lever to make Europe climate neutral by 2050. The taxonomy is therefore likely to have far-reaching effects, as projects classified as sustainable are becoming increasingly popular with investors.
If nuclear power and natural gas were to be recognized as green technologies, the companies affected would benefit in particular. It would be much easier for you on the capital market. “With the taxonomy, you can hope for more potential investors, and thus more money,” he told Capital.
Corporate bonds could then also be traded as green bonds. “Nuclear power would be considered a green security,” says Speich. “The demand for green bonds is very high, this would ensure the liquidity of these companies on the capital market.”
In the future, fund companies would have to consider whether or not to follow the EU taxonomy. The preliminary decision will have no influence on Deka’s financial products, according to Speich. “As of today, our filters for sustainable financial products remain as they are. We are not expanding them to include companies from the nuclear sector.”