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EU’s plan to include gas, nuclear in ‘green’ ranking leaves investors confused


Tricastin Evolutionary Power Reactor, a nuclear power station in France that cools towers

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Investors told CNBC that the controversial EU proposal to add nuclear and natural gas to its list of sustainable investments could cause further greenwashing.

European Commission, which is the executive branch of the EU, wants to help financial markets decide on sustainable investments. It is therefore proposing a taxonomy or green classification system to make sustainable investing easier.

This categorization was completed. sharply criticizedNatural gas and nuclear energy are both possible. Both sources are seen by the commission as an opportunity to facilitate the “transition towards a predominantly-renewable future.”

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

The plan has not yet become law, but investors — who are meant to benefit from clearer guidance — have raised some concerns.

“It will create some confusion for allocators,” Francesco Filia, CEO of Fasanara Capital — which as of October managed $3 billion in assets — said about the EU’s taxonomy.

Filia stated that the EU’s attempt to recognise nuclear and natural gas as transitional is difficult to comprehend because it seems to acknowledge that these sources of energy aren’t sustainable. His team will keep investing sustainably according to the same criteria that was previously established by the fund, he said.

Others share his opinion.

Isobel Edwards is a green bonds analyst with asset manager NN Investment Partners. Before the EU’s new classification, investors had to explain why they wanted funds allocated to natural gas or nuclear energy projects. Now, she said, investors will simply be able to say that “it’s just in the taxonomy” — making it easier to justify such decisions.

Edwards says that investors want more transparency from lawmakers and regulators. This is a key problem in sustainable investing. Money managers have difficulty comparing investment options, and their sustainability levels because there is no standardised reporting.

This is because sustainable investing has become more popular. The MSCI World ESG Leaders’ index was up around 20% in 2021 — its highest annual gain ever, Reuters reported.

Fabio Ranghino, head of strategy and sustainability at asset management firm Ambienta, told CNBC that the EU’s taxonomy is not confusing, however, and is just one tool of many.

He stated that “Nuclear is not a negative term, but it’s about managing waste.” He also said that today’s nuclear projects are very different to those built in 1950s.

But he said that while economies adjust to the new energy mix, it will “go through a couple years of confusion” and companies (both private and public) will have to be capable of reporting their sustainability metrics.