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EU Aims to Tackle Climate Change With Newly Adopted 'Green Finance' Guidelines

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European Union blue and gold flags flying at the European Commission building in Brussels, Belgium. 35007/ iStock / Getty Images Plus

Newly adopted guidelines set forth by the European Commission Tuesday aim to tackle climate change by way of the financial sector. The move comes to bolster the success of the Sustainable Action Plan published last year to reorient capital flows toward sustainable investment and manage financial risks from climate change, environmental degradation and social issues.



In short, the guidelines help define an environmentally friendly investment by providing companies with recommendations on how to report the impact of their activities on the climate, as well as how climate change impacts their business.

"The climate emergency leaves us with no choice but transit to a climate-neutral economy model," said Valdis Dombrovskis, vice-president responsible for financial stability, financial services and capital markets union. "Today's new guidelines will help companies to disclose the impact of the climate change on their business as well as the impact of their activities on climate and therefore enable investors make more informed investment decisions."

Efforts will ensure that 6,000 European Union (EU) companies, banks and insurance agencies transition to a climate-neutral economy, furthering 2030 climate and energy framework seeking to cut carbon emissions by 2030. The European Commission takes that goal one step further by seeking to reduce emissions to zero by 2050, which will require many sectors to find an additional annual investment of between 175 and 290 billion euros.

Public and private investments are needed to transform the continent's ability to deliver on climate-focused goals, according to the EU. To do this, financial planners have defined sustainable finance as a viable method of achieving climate change-related objectives, including climate change mitigation and adaptation, sustainable use and protection of water and marine resources, the transition to a circular economy, waste prevention and recycling, pollution prevention and promoting healthy ecosystems.

Among other things, the new guidelines classify sustainable activities to create a "common language," establish EU labels for green financial products and strengthen the transparency of companies' impacts on the environment. The report sets parameters on how businesses can qualify as "green" based on their contributions to the EU's six environmental objectives without negatively affecting other businesses, reports Reuters.

The guidelines do not include coal and nuclear power and instead support 2030 goals that agree to establish at least one-third share of renewables in final energy consumption, a one-third energy savings when compared to business-as-usual scenarios, and establish a minimum cut of 40 percent in greenhouse gas emissions when compared to 1990 levels.

"The aim of these guidelines is to help companies disclose high quality, relevant, useful, consistent and more comparable non-financial (environmental, social and governance-related) information in a way that fosters resilient and sustainable growth and employment, and provides transparency to stakeholders," reads the report text, adding that the "non-binding guidelines could represent best practice for all companies that disclose non-financial information."

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Protestors marched outside the Prudential Center in Newark, New Jersey on Monday, August 26, during the MTV Video and Music Awards to bring attention to the water crisis currently gripping the city. Karla Ann Cote / NurPhoto / Getty Images

By Will Sarni

It is far too easy to view scarcity and poor quality of water as issues solely affecting emerging economies. While the images of women and children fetching water in Africa and a lack of access to water in India are deeply disturbing, this is not the complete picture.

The city of Flint, Michigan, where dangerous levels of pollutants contaminated the municipal water supply, is a case in point — as is, more recently, the city of Newark, New Jersey.

The Past is No Longer a Guide to the Future

We get ever closer to "day zeros" — the point at when municipal water supplies are switched off — and tragedies such as Flint. These are not isolated stories. Instead they are becoming routine, and the public sector and civil society are scrambling to address them. We are seeing "day zeros" in South Africa, India, Australia and elsewhere, and we are now detecting lead contamination in drinking water in cities across the U.S.

"Day zero" is the result of water planning by looking in the rear-view mirror. The past is no longer a guide to the future; water demand has outstripped supplies because we are tied to business-as-usual planning practices and water prices, and this goes hand-in-hand with the inability of the public sector to factor the impacts of climate change into long-term water planning. Lead in drinking water is the result of lead pipe service lines that have not been replaced and in many cases only recently identified by utilities, governments and customers. An estimated 22 million people in the US are potentially using lead water service lines. This aging infrastructure won't repair or replace itself.

One of the most troubling aspects of the global water crisis is that those least able to afford access to water are also the ones who pay a disproportionately high percentage of their income for it. A report by WaterAid revealed that a standard water bill in developed countries is as little as 0.1 percent of the income of someone earning the minimum wage, while in a country like Madagascar a person reliant on a tanker truck for their water supply would spend as much as 45 percent of their daily income on water to get just the recommended daily minimum supply. In Mozambique, families relying on black-market vendors will spend up to 100 times as much on water as those reached by government-subsidized water supplies.

Finally, we need to understand that the discussion of a projected gap between supply and demand is misleading. There is no gap, only poor choices around allocation. The wealthy will have access to water, and the poor will pay more for water of questionable quality. From Flint residents using bottled water and paying high water utility rates, to the poor in South Africa waiting in line for their allocation of water — inequity is everywhere.

Water Inequity Requires Global Action — Now.

These troubling scenarios beg the obvious question: What to do? We do know that ongoing reports on the 'water crisis' are not going to catalyze action to address water scarcity, poor quality, access and affordability. Ensuring the human right to water feels distant at times.

We need to mobilize an ecosystem of stakeholders to be fully engaged in developing and scaling solutions. The public sector, private sector, NGOs, entrepreneurs, investors, academics and civil society must all be engaged in solving water scarcity and quality problems. Each stakeholder brings unique skills, scale and speed of impact (for example, entrepreneurs are fast but lack scale, while conversely the public sector is slow but has scale).

We also urgently need to change how we talk about water. We consistently talk about droughts happening across the globe — but what we are really dealing with is an overallocation of water due to business-as-usual practices and the impacts of climate change.

We need to democratize access to water data and actionable information. Imagine providing anyone with a smartphone the ability to know, on a real-time basis, the quality of their drinking water and actions to secure safe water. Putting this information in the hands of civil society instead or solely relying on centralized regulatory agencies and utilities will change public policies.

Will Sarni is the founder and CEO of Water Foundry.

Note: This post also appears on the World Economic Forum.

Reposted with permission from our media associate Circle of Blue.

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