(Clarifies article to more accurately reflect the status of offsetting to be included in the taxonomy)
The European Commission has included an element of biodiversity offsetting in its taxonomy of what counts as a sustainable investment, against the recommendations of the body advising the EU executive on green taxonomy rules.
The EU executive released its overarching EU taxonomy law in 2020 as a way of classifying economic activities as sustainable to help direct investment to activities aligned with the bloc’s net zero emissions trajectory by 2050 and other broad environmental goals.
As such, the EU taxonomy is being closely watched by investors and regulators worldwide for its potential to impact investment decisions.
The Commission has since published a number of delegated acts that expand and add criteria to the taxonomy, including more recently a new set of criteria for economic activities that make a substantial contribution to one or more non-climate environmental objectives such as the circular economy, protection of water, pollution prevention, and restoration of biodiversity and ecosystems.
The Platform on Sustainable Finance, an expert working group to the EU’s executive arm, had called for the removal of biodiversity offsets from the list in a draft delegated act published Apr.5.
However, in the final version released on Wednesday, an element of biodiversity offsetting was included anyways, albeit with slightly different wording and in partial form.
In the act, the Commission said that it excluded “the offsetting of the impacts of another economic activity”, but also added that “only net biodiversity gains resulting from conservation/restoration can be accounted for as substantial contribution under this activity”.
Since biodiversity offsetting by definition needs to have a net biodiversity achievement, the final version was understood to mean that the Commission did not entirely exclude biodiversity offsetting, despite the unclear language.
Frederic Hache, lecturer in sustainable finance at French university Sciences Po, criticised the move on LinkedIn.
“As ’net’ means by definition offsetting, we understand it to mean that offsetting is included, as long as conservation/restoration actions go just a little bit beyond offsetting to reach a biodiversity ‘net gain’. In other words, merely offsetting is bad, but if you offset just a tad more than what you destroyed this is green,” Hache wrote.
In a later post, he clarified that he understood the Commission’s wording to mean that only one element of the activity would be considered as achieving the taxonomy’s status as a sustainable investment.
“The part of the activity that corresponds to the net biodiversity gains can be considered as making substantial contribution to restoration and protection of biodiversity and ecosystems. The part of the activity that corresponds to the compensation of the environmental damage remains excluded,” he stated.
By Rebecca Gualandi – rebecca@carbon-pulse.com
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