Energetica India Magazine - September 2022

energetica INDIA- September_2022 33 FINANCE 50 trillion assets under management— warned labelling gas as green sends mixed messages about the EU’s serious- ness in reducing emissions, negatively impacting investors’ ability to align their portfolios with net-zero. The EU’s sustainable investments in- vestor group (Eurosif) expressed serious concerns that including gas and nucle- ar energy will most likely jeopardise its credibility and global standing in finan - cial markets. The lending arm of the EU, the Europe- an Investment Bank, also said including fossil fuels in taxonomies risks allowing greenwashing, and it will reject gas in- vestments as “green”. Similar reactions have emerged in the United Kingdom (UK). The UK govern- ment is actively considering adding gas to its green taxonomy amid concerns that growing fossil fuel divestments could harm its gas industry. In response, global investor groups—IIGCC, United Nations-backed Principles for Responsi- ble Investment and the UK Sustainable Investment and Finance Association— have urged the government not to repeat the EU’s mistakes for short-term “polit- ical expediency” or risk losing investor confidence. These indications are clear. Investors rely on taxonomies to guide them—they want certainty they are investing in sci- entifically-proven clean and sustainable technologies. Taxonomies succumbing to industry pressures or attempting to bal- ance all stakeholders’ interests in lieu of science, lose influence. Consistent with IEEFA’s views, investors consider labelling fossil fuels as “green” investments unjustified, even if they play a role during the transition. Excluding high-emitting activities from sustainable finance taxonomies does not deprive them of funding in capital mar- kets, but recognising them as “sustain- able” sends misleading signals to inves- tors wanting assurance on the alignment of their assets. Asian markets are not immune to indus- try lobbying. Many—South Korea and Indonesia included—have strayed from developing strictly science-backed tax- onomies. By contrast, the EU’s situation helped China take the lead in taxonomy devel- opments by excluding fossil fuel elec- tricity generation activities. China is not accommodating all stakeholders’ inter- ests despite new domestic coal and gas projects said to be required through the energy transition phase. Russia’s green finance rules are also in - dependent of fossil fuel interests. Power projects must meet stringent lifecycle emission criteria to qualify as green in- vestments, likely requiring the use of technically and economically viable car- bon capture technology yet to be avail- able at scale anywhere in the world. Investors globally are urging govern- ments to commit to clear, strong invest- able policies while openly calling out gre- enwashing—a sign the market is fed up with the politicisation of taxonomies. India has an opportunity to show leader- ship and align with climate science. This would demonstrate India’s seriousness and win global investors’ trust—some- thing the EU Parliament has clearly mis- understood.