Green taxonomy, the Paris Agreement and the circular economy. Sustainable investment refers to dozens of terms and abbreviations, the meaning of which everyone may not know. And since these words are already part of every investment, we have prepared another article for you with a brief description of the most used terms.
Embodied carbon
Embodied carbon refers to emissions that can no longer be reversed. These include, for example, energy used for the mining, extraction, treatment, processing and production of raw materials. The reduction of embodied carbon can be achieved by selecting appropriate materials and technologies to reduce its level.
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Operational carbon
The term "operational carbon" means energy emissions to maintain the temperature in the building and energy used for the lighting, power supply and overall operation of the building. In particular, electricity and natural gas fall under operational carbon. Its level can be reduced by improving the energy efficiency of the building, and its maintenance and operation, optimising the consumption, implementing state-of-the-art innovations, and modernising the building envelope.
Greenwashing
Greenwashing is a term for communicating and sharing false information about the environmental responsibility of companies and firms. Companies or individuals try to improve their reputation and present an environmentally-responsible image of themselves by using this artificially built image.
Greenwashing includes marketing and PR activities through which companies tell a false story or hide facts that prove their environmentally-unfriendly and unecological behaviour. The English term greenwashing was created by combining the words green and whitewashing, which defines the blurring or justification of unfavourable facts in order to project a better image of a company or a particular topic.
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The Paris Agreement
The Paris Agreement of 2015 is part of the UN Framework Convention on Climate Change and is an international climate agreement. The global treaty aims at reducing greenhouse gas emissions after 2020. All EU Member States have negotiated and ratified this agreement. They are committed to becoming the first climate-neutral economy and society by 2050.
The objective of this long-term strategy is
1. maintaining the mean global temperature rise well below 2 °C above pre-industrial levels and striving to keep the temperature rise below 1.5 °C above pre-industrial levels;
2. increasing the ability to adapt to the adverse effects of climate change and strengthening resilience to climate change, which will not jeopardise food production;
3. and the alignment of financial flows with low-emission climate change-resilient development.
The text of the agreement was negotiated during the 2015 Paris Climate Change Conference, approved by all 195 contracting parties and adopted on 12 December 2015.
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Green taxonomy
Taxonomy defines the classification of economic activities according to how they benefit the environment. This classification system for green taxonomy has been in force in the European Union since 2020 and concerns the division of economic activities, technologies and resources according to their climate-friendliness. Green taxonomy takes into account the following six objectives:
1) climate change mitigation;
2) climate change adaptation;
3) sustainable use and protection of water and marine resources;
4) transition to a circular economy;
5) pollution prevention and control;
6) the protection and restoration of biodiversity and ecosystems.
In order for projects to comply with the taxonomy, they must meet at least one of the aforementioned points, while simultaneously not doing any significant damage to any of the points. The purpose of the classification is to make the environment more transparent for investors and to take into account which projects promote a sustainable environment.
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Circular economy
Unlike a linear economy, which has resources at one end and products and waste at the other end, the circular economy tries to convert waste back into a resource.
The process consists of three main principles:
1. Closing the resource loop – reconverting waste material back to resources;
2. Slowing the resource flow – increasing the product life through innovation, technology and design;
3. Streamlining the resource flow – changing consumer behaviour (from ownership to sharing), maximising resource use.
An example of a circular economy in practice is the use of deposits for plastic packaging, digitisation, the recycling and reuse of waste substances, and cloud solutions and online platforms.
Biodiversity
Biodiversity (biological diversity) is a term indicating the diversity of living organisms on Earth. This variability is a prerequisite for functioning ecosystems and for maintaining an ecological balance in nature.
However, biodiversity is particularly threatened by human activity, which causes the degradation of ecosystems and the environment and the associated loss of irreplaceable natural resources and extinction of animal species. Other threatening factors include the extraction of raw materials, climate change, the depletion of natural resources and ecosystems, the introduction of alien species that threaten local ones, pollution of the environment and diseases.
To preserve biodiversity, it is necessary to protect the ecosystems, introduce ecological farming, limit fishing, fight against the causes of climate change and avoid invasions of introduced species of plants and animals.
We’re no stranger to sustainable investments. Don’t hesitate to contact our experts, who will answer your questions and help you implement the individual ESG criteria.