Europe’s responsible investors “up against” Japanese trade bodies in “battle” over EU taxonomy

Keidanren, the Japanese Business Federation, led a campaign to water down the EU’s current attempts to define ‘green’ business activities through its taxonomy, according to research from NGO Influence Map.

On the back of a major study released in December, Influence Map has now focused in on corporate lobbying efforts in Japan, saying that Keidanren was “the most oppositional industry association of any origin (EU or otherwise) to an ambitious EU taxonomy”.

“While the majority of lobbying came from within the EU, the policy has also seen opposition from international business trade associations, seemingly concerned at the global implications of an ambitious EU taxonomy” it said in a briefing published today.

The briefing points to a position paper from September, in which it claims Keidanren argued that the taxonomy could “[destabilise] international financial markets”. It says the body stated that the framework didn’t reflect the concerns of countries outside the EU, and warned against efforts to take the taxonomy to a globally standardised level.

“Furthermore, whilst opposing a ‘brown’ taxonomy on the basis that it could create “reputational risk” for certain sectors, Keidanren suggested that the green taxonomy should not be “arbitrarily eliminating specific economic activities, and the use of technologies and products, particularly fossil fuel,” Influence Map writes.

The Technical Expert Group on Sustainable Finance that is advising the European Commission on the details of the taxonomy, recently recommended its expansion to ‘brown’ activities – those that undermine the Paris Agreement – and the complete exclusion of “solid fossil fuels”, i.e. coal. The former proposal had been put forward previously by politicians, but was left out of the legal agreement reached by the EU in December.

Another key area of lobbying was around the international applicability of the EU taxonomy, the study concluded. The taxonomy regulation will apply to all financial market participants that sell financial products in the EU, regardless of where the investment itself is located. “The Japanese Bankers Association and the Japan Gas Association lobbied for exceptions for investments in projects based outside the EU,” says Influence Map.

“Additionally, many trade associations expressed concerns about what would happen if the taxonomy was taken up internationally. Keidanren opposed the international standardisation of the taxonomy whilst The Japanese Bankers Association and the Japan Business Council in Europe both argued that the EU taxonomy should be made less prescriptive on the basis that it may be used as a reference outside the EU.”

As well as the Japanese Bankers Association, Keidanren and the Japanese Business Council in Europe, Influence Map said it had evidence of five other Japanese trade bodies, from industries including energy and manufacturing, that has also sought to water down the current EU taxonomy.  

It said such lobbying positions were at odds with a number of major European financial institutions, such as Aviva, Groupe BPCE and BNP Paribas, that support the proposals, which will be signed off by European Parliament before the summer.

“The key finding of this research is that there is an emerging battle between progressive financial institutions, led by a small but powerful group of European players actively and openly supporting a strong taxonomy regulation,” the NGO said. “These are up against interests representing heavy industry and the fossil fuel value chain that oppose a strong taxonomy regulation.”

Keidanren was not available for comment at the time of publication.