GEORISK Project Sustainable Finance Regulation 7 October 2019 This - - PowerPoint PPT Presentation

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No [818232 — GEORISK]

Sustainable Finance Regulation

GEORISK Project

7 October 2019

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Framework of the sustainable finance regulation 2

EU Climate and energy targets:

• 2020: 20% GHG reduction, 20% RES, 20% energy efficiency improvement
• 2030: 40%+ GHG reduction, 32% RES, 32.5% energy efficiency
• 2050: Objective of net zero carbon by 2050 set in the EU long term strategy
• Upcoming Climate Law
• Paris Agreement, 1,5/2°C
• 17 UN Sustainable Development Goals

Estimate that meeting these challenges requires additional EUR 175-290 billion/year of investments in the energy systems

• Public finance cannot cover all
• Need to direct private finance to fund the decarbonisation of the EU economy.

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Objectives of the Sustainable finance regulation 3

• 1. reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth;
• 2. manage financial risks stemming from climate change, resource depletion, environmental degradation and

social issues;

• Natural disasters’ increasing costs
• Societal & reputational impacts (income inequality, poor working conditions…)
• 3. foster transparency and long-termism in financial and economic activity.
• inform market participants, help to steer companies in a more sustainable and long-term direction.
• reduce the undue pressure for short-term performance in financial and economic decision-making

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Sustainable Finance

What is “sustainable finance”?

• Criteria for eligibility of projects to green financial products (e.g. Green bond…)

Purpose of the regulation: create an harmonised framework to attract more capital to such assets with transparency and tradability Stake for the geothermal sector: this regulation’s criteria may define private capital flows to renewable projects Key topic: prevent stranded assets which may have a huge impact on the financial sector

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Sustainable Finance Taxonomy 6

Established by the Technical Expert Group on Sustainable finance. Its objectives include:

• An EU classification system – the so-called Taxonomy – to determine whether an economic activity is environmentally

sustainable;

• An EU Green Bond Standard;
• Benchmarks for low-carbon investment strategies; and
• Guidance to improve corporate disclosures of climate-related information.

In practice the taxonomy provides a list of technologies eligible to be considered as a sustainable investment (e.g. RES technology, Nuclear is for instance not included).

• Proposes criteria for these technologies in terms of LCE, “do no harm criteria”

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Sustainable Finance Taxonomy

Proposed criteria for geothermal: geothermal electricity: “life cycle emission” threshold of 100gCO2e/kWh, decreasing to 0gCO2e/kWh in 2050; requirement of compliance with the Water Framework Directive, Air Quality regulations and other European Environmental legislations. geothermal cogeneration or geothermal heat: ‘The threshold is calculated from the relative production of heat and power, and based on the declining power generation threshold of 100 gCO2e/kWh(e), and a notional heat threshold of 30 gCO2e/kWh(th)’ declining to net zero for both metrics by 2050. geothermal heat pumps to justify a Seasonal Coefficient of Performance of at least 3.33 to be eligible.

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Process sustainable finance regulation 8

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This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No [818232 — GEORISK]