Written answers

Thursday, 10 November 2022

Department of Finance

Foreign Direct Investment

Photo of Richard BrutonRichard Bruton (Dublin Bay North, Fine Gael)
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104. To ask the Minister for Finance if the EU taxonomy has yet started to influence the pattern of investment in Ireland; and if he will make a statement on the matter. [55848/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I would like to thank the Deputy for this question; as he is probably aware, the EU Taxonomy is not yet fully agreed. While the first two environmental goals, namely adaption and mitigation, have been completed and brought into force the remaining four, that is pollution, water/marine, circular economy and biodiversity, remain to be negotiated and agreed, which I hope will occur in the near future.

For the remaining four goals, negotiations are ongoing in Council, and my Departmental officials are working closely with the Commission and other Member States, including examining the technical input from the Platform for Sustainable Finance. There are also likely to be some areas where finding agreement on sustainability parameters will be difficult, such as for agriculture.

Additionally, the Platform has produced a draft report on the social element of ESG, and there have been initial discussions on the possibility of expanding the Taxonomy to include transitional elements so that it might cover intermediate or transition performance in certain difficult-to-decarbonise sectors.

Reporting on alignment against the adaptation and mitigation elements of the taxonomy started this year for financial services firms and listed corporates but it is too early to tell whether it has demonstrably affected investment in Ireland or elsewhere, although we have seen increased investment in so-called Article 9 sustainable investment funds.

There are some early indications of the state-of-play on sustainable investment: recent research by the European Commission-Joint Research Centre and the University of Zurich estimates that the level of taxonomy alignment for various financial institutions across Europe varies from around 0.8% for banks to 4.8% for insurers and 3.2% for investment funds.

These are undoubtedly low starting points although the research focuses only on larger firms – so these figures will rise as the taxonomy expands to cover additional environmental goals and additional sectors. We also expect these figures to increase as directly comparable taxonomy-aligned data become available as more financial institutions and corporates begin to report.

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