The EU reached an agreement on a classification system for green financing designed to jump-start sustainable investing within the bloc, parliamentarians said Dec. 6, and it will not include coal or nuclear, something that had been a matter of debate.

Under the framework, known as the taxonomy, companies or financial products claiming to be sustainable will have to disclose how much of their investments are eco-friendly, the Greens/European Free Alliance said in a statement.

The European parliament, Council and Commission reached a compromise agreement after several months of discussions.

The taxonomy is part of the EU's sustainable finance action plan, and the 414-page document proposed by the EU's technical expert group on sustainable finance was published in June.

'Credible definitions'

"Now that we have credible definitions on which economic activities can be considered sustainable, the new Commission will have to start preparing to clearly identify environmentally harmful activities and the investments that currently support them," Bas Eickhout, member of the European parliament and the Greens/EFA taxonomy rapporteur, said in a statement.

All financial products will have to prove their "greenness" based on EU criteria, not on their own methodologies, and those products that do not have any sustainability claims will have to provide a disclaimer. Nuclear energy will not be considered an environmentally sustainable investment under a strengthened no-harm test.

Fiona Reynolds, CEO of U.N.-backed investor group Principles for Responsible Investment, said the taxonomy "will enable investors to determine the proportion of revenue from sustainable economic activities financed by the investment portfolio. The taxonomy will also support active ownership efforts: investors and companies can use the taxonomy to identify future growth opportunities."

Massive investment

EU officials said the taxonomy was essential to ensure the EU is carbon-neutral by 2050.

"Massive investments will be needed to transit to a climate-neutral economy. The climate emergency leaves us with no choice but to act now. This EU 'green list', or taxonomy, will help unleash the billions of euros needed to make Europe the world's first climate neutral continent by 2050," European Commission Executive Vice-President Valdis Dombrovskis said in a statement.

The Council and the Parliament will now look at the taxonomy in detail before sending it off to the Commission for approval.

EU experts will prepare screening criteria and thresholds for environmentally friendly economic activities, the Greens said.