Environmental assessments and sustainable finance frameworks: will the EU Taxonomy change the mindset over the contribution of EIA to sustainable development?

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Box 1. High-level principles for aligning approaches and international coordination on sustainable finance

The G20 encourages jurisdictions that intend to develop their own alignment approaches to sustainable finance to take the following set of voluntary principles into account: Principle 1: Ensure material positive contributions to sustainability goals and focus on outcomes; Principle 2: Avoid negative contribution to other sustainability goals (e.g. through do no significant harm to any sustainability goal requirements); Principle 3: Be dynamic in adjustments reflecting changes in policies, technologies, and state of the transition; Principle 4: Reflect good governance and transparency; Principle 5: Be science-based for environmental goals and science- or evidence-based for other sustainability issues; and Principle 6: Address transition considerations. (Source: SFWG 2021, p.7)

Box 2. Selected provisions of the taxonomy: climate change mitigation

The Taxonomy declares that an economic activity shall be considered to significantly harm climate change mitigation, where it leads to significant greenhouse gas emissions. Such consideration has to take into account the life cycle of the products and services provided by an economic activity, including evidence from existing life-cycle assessments.^1 On the other hand, the Taxonomy treats an economic activity as contributing substantially to climate change mitigation if that activity contributes substantially to the stabilisation of greenhouse gas concentrations in the atmosphere. It further stipulates that the activity provides substantive contribution to climate change mitigation if it: generates, transmits, stores, distributes or uses renewable energy, including through using innovative technology with a potential for significant future savings or through necessary reinforcement or extension of the grid; improves energy efficiency, except for power generation activities; increases clean or climate-neutral mobility; switches to the use of sustainably sourced renewable materials; increases the use of environmentally safe carbon capture and utilisation and carbon capture and storage technologies that deliver a net reduction in greenhouse gas emissions; strengthens land carbon sinks, including through avoiding deforestation and forest degradation, restoration of forests, sustainable management and restoration of croplands, grasslands and wetlands, afforestation, and regenerative agriculture; establishes energy infrastructure required for enabling the decarbonisation of energy systems; produces clean and efficient fuels from renewable or carbon-neutral sources; or enables any of the above activities without leading to a lock-in of assets that undermine long-term environmental goals, considering the economic lifetime of those assets; and has a substantial positive environmental impact, on the basis of life-cycle considerations. Where there is no technologically and economically feasible low-carbon alternative, the activity shall qualify as contributing substantially to climate change mitigation where it: has greenhouse gas emission levels that correspond to the best performance in the sector or industry; does not hamper the development and deployment of low-carbon alternatives; and does not lead to a lock-in of carbon-intensive assets, considering the economic lifetime of those assets.

Box 3. Selected provisions of the taxonomy: protection and restoration of biodiversity and ecosystems

An economic activity shall be considered to significantly harm the protection and restoration of biodiversity and ecosystems, where that activity is significantly detrimental to the good condition and resilience of ecosystems; or detrimental to the conservation status of habitats and species, including those of Union interest. It shall qualify as contributing substantially to the protection and restoration of biodiversity and ecosystems where it contributes substantially to protecting, conserving or restoring biodiversity or to achieving the good condition of ecosystems, or to protecting ecosystems that are already in good condition, through: nature and biodiversity conservation, including achieving favourable conservation status of natural and semi-natural habitats and species, or preventing their deterioration where they already have favourable conservation status, and protecting and restoring terrestrial, marine and other aquatic ecosystems in order to improve their condition and enhance their capacity to provide ecosystem services; sustainable land use and management, including adequate protection of soil biodiversity, land degradation neutrality and the remediation of contaminated sites; sustainable agricultural practices, including those that contribute to enhancing biodiversity or to halting or preventing the degradation of soils and other ecosystems, deforestation and habitat loss; sustainable forest management, including practices and uses of forests and forest land that contribute to enhancing biodiversity or to halting or preventing degradation of ecosystems, deforestation and habitat loss; or enabling any of the above activities without leading to a lock-in of assets that undermine long-term environmental goals, considering the economic lifetime of those assets; and having a substantial positive environmental impact, on the basis of life-cycle considerations.

Figure 1. The failure of an economic discourse on sustainable development to protect the environment. Adapted from Bond et al. (2021)

Figure 2. Operating space for EIA and EU taxonomy for sustainable activities regulation in the context of sustainable development framings.

SFWG. 2021. ‘G20 sustainable finance working group - 2021 synthesis report. 2021 Oct 7, Accessed 2021 Oct 27. https://g20sfwg.org/wp-content/uploads/2021/10/G20-SFWG-Synthesis-Report.pdf.

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Bond A, Pope J, Morrison-Saunders A, Retief F. 2021. Taking an environmental ethics perspective to understand what we should expect from EIA in terms of biodiversity protection. Environ Impact Assess Rev. 86:106508. doi:https://doi.org/10.1016/j.eiar.2020.106508.

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