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EU’s plan to put gas, nuclear on ‘green’ rankings confuses investors


Cooling towers at the Tricastin Evolution Power Reactor nuclear power plant in France.

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Investors told CNBC that a controversial EU plan to include nuclear and natural gas in its ranking of sustainability investments is confusing and could lead to a greenwashing more.

The European Commission, the EU’s governing body, wants to make it easier for financial markets to decide what is a sustainable investment. It is therefore introducing a green classification system, or classification, to make sustainable investing more transparent.

The classification has been harshly criticized including natural gas and nuclear power. The Commission sees both sources as a means to “facilitate the transition towards a future based primarily on renewable energy.”

However, critics, such as Austrian officials and environmental activists, have argued that these should not receive green labels, even temporarily.

The plan has yet to become law, but investors – who benefit from clearer guidance – have raised some concerns.

“It will create some confusion for allocators,” said Francesco Filia, CEO of Fasanara Capital, a $3 billion asset manager in October.

Filia said the EU’s attempt to recognize nuclear and gas as “transitional” was confusing because it appeared to be a tacit admission that these energy sources were unsustainable. He added that his team will continue to invest sustainably by following the criteria the fund has previously established.

His opinion is shared by others.

Isobel Edwards, green bonds analyst at asset management firm NN Investment Partners, said before the new EU classification, if an investor wants to allocate capital to nuclear energy or natural gas projects However, they must fully explain how doing so can be considered sustainable. Now, she said, investors will be able to simply say “it’s just in the class” – making it easier to justify such decisions.

According to Edwards, investors want more help from regulators and legislators with disclosure, which is one of the main challenges in sustainable investing. The lack of standardized reporting makes it difficult for money managers to compare investment opportunities, including their sustainability.

It comes as sustainable investing becomes increasingly prominent. The MSCI World ESG Leaders’ index is up about 20% in 2021 – its highest annual gain ever, according to Reuters.

Fabio Ranghino, head of strategy and sustainability at asset manager Ambienta, told CNBC that the EU classification is not confusing and is just one of many tools.

“For us, nuclear is not a bad word, it is about waste management,” he said, adding that the nuclear projects being built today are different from those being built. in the 1950s.

However, he said that as economies adapt to a new energy mix, “we’re going to have a couple of confusing years” as companies, both private and public, will have to be able to ability to report their sustainability indicators.

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