Sustainability Blog #20

During the last two months, the European Union has enacted a series of important pieces of legislation aimed at decarbonising the economy and fostering environmental responsibility. These initiatives cover a wide range of sectors, from energy to product manufacturing, and even financial markets. With a focus on transparency, innovation, and consumer protection, the EU's new laws are designed to combat greenwashing and ensure genuine progress towards climate goals. These comprehensive measures underscore the EU's commitment to a greener future, setting a high standard for environmental governance worldwide.

Without a doubt, one of the most important pieces of legislation that have recently been adopted is the new Nature Restoration Law, which was adopted on 17 June. This law mandates the restoration of degraded ecosystems across Member States. It sets binding targets for the recovery of biodiversity and the enhancement of ecosystem services, such as carbon sequestration and water regulation. The goal is to restore 30% of terrestrial, coastal, freshwater, and marine ecosystems to a healthy state by 2030. In forested and agricultural regions, Member States must implement measures to improve biodiversity indicators. Additionally, they are required to restore and rewet 30% of drained agricultural peatlands, ensuring at least a quarter of this area is rewet by 2030. This legislation is a crucial step in addressing environmental degradation and climate change, aiming to restore 20% of the EU's land and sea areas by 2030.

Moreover, on 21 May, the European Council announced the adoption of a new regulatory package establishing common market rules for renewable and natural gases and for hydrogen. The package consists of two acts: a Directive on common rules for the internal markets for renewable gas, natural gas and hydrogen and a Regulation on the internal markets for renewable gas, natural gas and hydrogen. Key measures include setting up a certification system for low-carbon hydrogen and creating an infrastructure for hydrogen transport and storage. The rules intend to facilitate the transition to a greener energy system, aligning with the EU's climate goals. You can find the directive here and the regulation here.

On 27 May, the European Council announced the approval of regulations for a new ecodesign framework to establish sustainability requirements for nearly all products across the EU, as well as a new ban on the destruction of unsold textiles and footwear. The regulations aim to make products more durable, reusable, repairable, and recyclable. By focusing on circular economy principles, these measures will help reduce waste and environmental impact. Businesses will need to ensure compliance with these sustainability criteria to avoid penalties.

On the same day, the EU adopted the Net-Zero Industry Act to accelerate the development and deployment of decarbonisation technologies. This legislation supports the scaling-up of clean tech manufacturing, including solar panels, wind turbines, and batteries. By fostering innovation and investment in green technologies, the act aims to strengthen Europe's industrial base and achieve net-zero emissions by 2050.

Finally, the European Securities and Markets Authority (ESMA) has issued new guidelines for funds using ESG or sustainability-related names to mitigate greenwashing risks. The guidelines establish investment thresholds and introduce a transition category for funds progressing towards sustainability. This regulatory framework ensures that fund names accurately reflect their investment strategies and sustainability goals, protecting investors from deceptive practices. You can find the framework here.