The German financial supervisory authority, BaFin, has chosen its own path to deal with the EU taxonomy – in particular when it comes to nuclear and gas. 

BaFin is betting on full transparency within its mandate to tackle the risk of greenwashing. It is obliging asset managers to state in prospectuses whether investment funds hold portfolio companies active in gas and nuclear. 

The president of BaFin, Mark Branson, has made it clear that it will initially only apply to German funds. This approach goes hand-in-hand with BaFin’s remit when it comes to EU taxonomy.

“In a way, we are the financial police but certainly not the environmental, ethical or social police. It is not up to us to decide which technology underlying the financial products is qualified as sustainable,” Branson said. 

The energy crisis following the invasion of Ukraine may have played a role in speeding up the plans of the EU Commission to include gas and nuclear as sustainable economic activities in its taxonomy. 

The decision may confuse investors who intend to invest sustainably, and could also make it more difficult for regulators to combat greenwashing. 

Problems have arisen in the specific design of the taxonomy, according to Branson and there is further debate on the proposed social taxonomy. Science may define what is sustainable in terms of the environment, but this is already a complex task and policymakers must decide what energy sources are necessary to make the transition to a low-carbon economy. 

But there may not be a consensual view on social issues, and designing a social taxonomy is unrealistic for Branson as a means to drive investments. Environment, social and governance do not necessarily belong together in a taxonomy.   

Luigi Serenelli, IPE DACH Correspondent