<p><em>Doha, April 2022</em></p>

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<p><strong>The catalyst for change? The EU&rsquo;s climate strategy sends ripple effects across the world </strong></p>

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<p>Large corporations are set to pump huge sums of money into the fight against climate change as the European Union&rsquo;s green taxonomy of sustainable investments comes into effect. The EU&rsquo;s Taxonomy is a technical rulebook that identifies sustainable activities that contribute to the bloc&rsquo;s green transition and comply with the Paris Agreement under the EU Green Deal.</p>

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<p>Climate change adaptation and mitigation are two of six environmental objectives underpinning the EU Taxonomy, which includes, apart from climate change mitigation and adaption, protection of water and marine resources; transition to a circular economy; pollution prevention and control; and protection and restoration of biodiversity and ecosystems.</p>

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<p>According to the Taxonomy, if a company works in any of the six fields, it can be considered sustainable as long as it meets the &lsquo;Do No Significant Harm&rsquo; (DNSH) principle. The DNSH principle entails that for an activity (investment-based or reform-based) to be sustainable, it should not lead to significant harm to any of the other environmental objectives and should follow human rights and labour standards.</p>

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<p>Under the EU&rsquo;s Taxonomy and following the publication of EU Green Taxonomy&rsquo;s Climate Delegated Act, corporations subject to the Non-Financial Reporting Directive (NFRD) are obliged to disclose the portion of their activities that qualify as &ldquo;environmentally sustainable&rdquo;.</p>

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<p>This offers companies an opportunity to measure their performance and progress towards delivering the environmental objectives in a transparent and comparable manner. Furthermore, good alignment with the Taxonomy could improve companies&rsquo; reputation and therefore access to finance, making them more attractive to banks and investors.</p>

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<p>Although not binding on non-EU financial market participants, European companies and oil and gas investors may use the Taxonomy to gauge whether or not an investment contributes to an &ldquo;environmental objective,&rdquo; such as climate change mitigation or adaptation.</p>

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<p>This could be particularly pertinent for large gas producing countries such as the US, Russia, Australia, Qatar, and the UAE, and would force producers to align their strategies with the &lsquo;technical screening criteria&rsquo; outlined for fossil gas under the EU Taxonomy to attract foreign investment, as well as ensure &ldquo;carbon-neutral&rdquo; export to EU countries.</p>

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<p>Despite its criticism from members of parliament, a number of environmental organisations and some sections of civil society, the EU Taxonomy is a game changer in the race to net zero carbon emissions by mid-century. Financial institutions now have to focus on where they invest, fund, and finance in order to comply with regulations which can force change in companies based far from European shores.</p>

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<p>For an in-depth look at the EU&rsquo;s Taxonomy, the Al-Attiyah Foundation&rsquo;s Sustainable Development Report, titled <em>Policy and Politics: The EU&rsquo;s Green Taxonomy</em>, is available as a free download <a href="https://bit.ly/3NKpM8q"><strong>HERE</strong></a></p>
