By Simon Jessop and Kate Abnett
– The European Commission’s draft proposal that natural gas and nuclear energy should be labelled as green investments has split money managers.
Below are the views of some investors spoken to by Reuters.
Ian Simm, founder and CEO at Impax Asset Management
“The inclusion of gas and nuclear (with conditions/caveats) in the EU taxonomy reflects a pragmatic approach. It’s inconceivable that we can transition to a zero emissions power sector without some contribution from gas or nuclear.”
Will Martindale, Group Head of Sustainability at Cardano
“We are comfortable investing in nuclear energy as part of the way in which we see our long-term sustainability objectives.
“The main concern is almost one of principle. Once you start to interfere politically in the taxonomy, then actually you open the floodgates in terms of future political interference, which is why in our view, it would be preferable that this delegated act wasn’t set up the way it was; that includes nuclear as well as gas.
“But gas, to us, is particularly egregious because it is a fossil fuel; by creating energy, you are releasing greenhouse gases into the atmosphere, which does contribute to climate change in a very direct way. And by sending a message that a fossil fuel can be green in specific circumstances, we think is unhelpful.”
Iain Richards, head of responsible investment at Columbia Threadneedle
“The taxonomy already has inherent contradictions, allowing activities in the EU preferential treatment relative to other countries or regions. At the end of the day this is a political decision.
“The reality of energy security is an element and the current stress in consumer prices is notable. Whether as a sustainable investment or as a taxonomy investment, these energy sources should not be excluded.”
“There are different tenors of investment strategies that can accommodate different tolerances to these things. Sometimes the climate lobby is too idealistic for its own good, putting that ahead of real progress where it matters.”
Kiran Aziz, head of responsible investments at KLP
“This is certainly positive for many Norwegian energy companies as their business activity in larger part could be aligned with (the) taxonomy. Nevertheless, carbon emissions from gas will weigh on a portfolio that seeks low carbon intensity.”
Philippe Zaouati, CEO of Mirova
“So today, the second part of the taxonomy, with gas and nuclear, for me is basically useless. It’s useless on two aspects. The first one, it’s useless because I do not agree with the vision that if gas and nuclear are not in the taxonomy then it will become very difficult to finance these projects; I do not think so. I think the big nuclear plants will be financed anyway; first, because it’s mostly public funding and also because the big investors and banks will follow the French government and others in this kinds of projects, anyway, inside or outside of the taxonomy.
“Then it’s also useless because the delegated act clearly states that the reporting will be two-fold. You will be able to report with or without gas and nuclear, and I’m pretty sure that the majority of responsible investors will use the without gas and nuclear figures to report, so I think it will have no impact on the investment decision.”
My-Linh Ngo, Head of ESG Investment, Portfolio Manager at BlueBay Asset Management, part of RBC
“Their inclusion in the taxonomy would certainly add further complexity – and confusion – to what is already a complex matter.
“For BlueBay, our analysis of the sector would take into account key environmental and social issues associated with those economic activities. Initiatives such as the taxonomy would be an input into our views, informing on our thinking, but we would look to do our own research and formulate our own thoughts. We would also take input from other sources and not be limited to referencing the taxonomy.”
Peter Giger, Group Chief Risk Officer at Zurich Insurance
“Some of that is politically driven and will just lengthen the transition or increase the risk of a disorderly transition. Because we don’t take the pain today, we’re going to take more pain tomorrow. And again, as an investor, you should ask yourself, are you in for the long (term)?”
Jan Kæraa Rasmussen, Head of ESG at Pension Danmark
“It will probably not influence our investment strategy. We don’t see gas as a green technology but recognise that it can play a significant role in the energy supply system during a transition period with coal phase out in power generation.
“Nuclear Power is more complex. The classic technology with large-scale plants based on traditional fission technology is very expensive and inflexible. Moreover, it is associated with security risks and nuclear waste.
“However, the development of smaller, flexible units based on new technology with considerable less problems from waste etc. is underway and can make nuclear power interesting for investors like us in the future.”
Bård Bringedal, CIO at Storebrand Asset management
“The taxonomy does not determine what constitute(s) a good investment, or even a good company. It’s an important framework for aligning investments to the green economy, but both companies and investors need to make up their own decisions on where to invest.
“If natural gas and nuclear are included in the taxonomy it will obviously impact our reporting on taxonomy alignment, but it will not have any immediate impact on our policy, product classification according to SFDR (Sustainable Finance Disclosure Regulation) or our investments.”
“Our view is that natural gas and nuclear may be a better energy sources, compared to other non-renewable energy sources, from a climate perspective short term. It is however clear that there are better energy sources from a sustainability perspective long- term and that we need to address that.”
(Reporting by Simon Jessop, Kate Abnett; additional reporting by Caroly Cohn; editing by Barbara Lewis)