EU member states on Dec. 18 agreed on a common classification system to define climate-friendly investments, which lawmakers say will unlock billions of euros in investments to make the EU carbon neutral by 2050.
The move comes after the European Parliament and European Council agreed late on Dec. 16 on the so-called taxonomy after reaching a compromise on the definitions of nuclear and gas investments.
"The goals of the Paris Climate Agreement will not be achieved by using public funds alone," Finland Finance Minister Katri Kulmuni said, adding that leverage from the whole economy, including financial and capital markets, is needed to support the transition. "Today's agreement will be key in helping redirect money to investments in sustainable sectors."
The Paris agreement aims to limit global warming to below 2 degrees C by the end of the century.
The taxonomy will aim to achieve six environmental objectives, including climate change mitigation and climate change adaptation. Both objectives will be established by 2020-end and applied by 2021-end.
The four other objectives — sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and protection of biodiversity and ecosystems — will be established in the taxonomy by 2021-end and implemented by 2022-end.
The EU Council and the Parliament will adopt the new rules after revision of the current text.