Council maintains nuclear as eligible for ‘green’ finance

Council maintains nuclear as eligible for ‘green’ finance (EURACTIV)

• The EU’s 28 member states have decided not to exclude nuclear projects from being eligible for sustainable (“green”) finance grants after voting on clarifying what represents sustainable finance.
• According to a spokeswoman, nuclear energy “should be evaluated on a scientific basis”, and more analysis was needed to assess the potential harm of nuclear waste.
• The Council plans to finish establishing its taxonomy on sustainable finance by the end of 2021, for it to be fully implemented by the end of the following year.

Analysis and Comments

• What does the European Commission wants to put in place, by the end of 2021? They want a “taxonomy”, so that investors in green bonds can be sure that the money raised is actually being used for green projects.
• Bonds that get the green “seal of approval” will be able to go into funds (at least in Europe) that market themselves as green. This means fund buyers, especially retail investors, can have confidence that the fund does “what it says on the tin”.
• While human PMs will be able to decide for themselves if nuclear fits their criteria, for ETFs and index funds the process will be simpler – if the EU says it’s green, it is green.
• The aim is that this opens up the end market for these bonds, with the plan being more buyers equals better pricing. Green bond issuance is growing – up 48% yoy in 1H 2019 to US$118bn.
• On that basis it is tough to see the logic for including nuclear – it would need some persuading that the average retail investor would expect to find nuclear power in their green bond fund.
• To many investors , it feels like a political fudge, although it is possible (putting as positive a spin on this as possible) to argue that the labelling process being proposed is better than no rules at all.