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Companies have been accused of overstating their green credentials through ‘greenwashing’, but a new EC regulation aims to end the practice and encourage environmental investment.

As a result the commission is pushing ahead with its Taxonomy categorisation plans, with a second delegated regulation expected next year, according to Fotini Ioannidou, the EC’s head of maritime safety.

In developing this highly complex July 2020 legislation, the EC is looking to codify sustainability.

“Taxonomy is an essential tool to incentivise green financing to support, in particular, carbon-intensive sectors, where change is urgently needed, and to shift investments to the right activities that will help realise the objectives of Green Deal,” explained Ms Ioannidou.

“It aims to create a common understanding of what ‘sustainable’ means in practice – for investors as well as companies that want to promote their green credentials.

“The EC is using Taxonomy in its drive to make Europe the first carbon-neutral continent by 2050, and the classification process needs to be seen in this context,” she added.

“We need to establish a common language among the different parties in the chain, the companies, the investors and the public and private financial institutions,” Ms Ioannidou told delegates at this week’s Maritime Cyprus Conference.

To be considered sustainable under the Taxonomy regulation, an activity must substantially contribute to at least one of six environmental objectives defined in the legislation. It should also “not significantly harm” any of the other five criteria and comply with minimum social safeguards.

The first two environmental objectives, climate change mitigation and adaptation, were in enshrined in what the EU calls its first Delegated Act, in force since January. It defines activities eligible under a ‘substantial contribution criterion’ for each sector.

A second Delegated Act, to be passed next year, will adopt criteria for the remaining four objectives: the sustainable use, and protection, of water and marine resources; the transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity and ecosystems.

In effect, Taxonomy will make it more difficult to make false claims of sustainability for projects, innovations and activities.

Transport companies will need to present data to potential investors who will need to demonstrate that the activity meets the Taxonomy requirements. Shipping companies that fall under the non-financial reporting directive in the EU, will report directly to a national supervisory authority on their Taxonomy alignment and eligibility.

Essentially, it was explained, the EC will use the Taxonomy regulations, not to penalise companies, but to encourage them to become more environmentally friendly.

For example, vessels with an Energy Efficiency Design Index (EEDI) value that are 10% below the International Maritime Organization standard will see a financial benefit through easier access to investment, as a result. Moreover, if a shortsea company can demonstrate modal shift from trucking to more environmentally friendly transport, sthat too will attract company benefits.

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