The European Parliament has voted to include gas and nuclear in the European Union Taxonomy of sustainable activities, paving the way for increased investment into these areas in a bid to meet climate change goals.

The issue has been fiercely debated over recent months and exposed deep cracks between countries in how to fight climate change, but the new ruling means both gas and nuclear will be introduced into the taxonomy from 2023.

The impact of falling Russian gas supplies also had a profound impact on the ruling, with many countries changing their views on whether they should be included.

Germany, which opposed the inclusion, was considering joining Austria and Luxembourg in bringing a lawsuit before the European Court of Justice in February. 

Asset managers will be hoping the ruling increases investment into ETFs such as the Sprott Uranium Miners UCITS ETF (URNM) and the Global X Uranium UCITS ETF (URNU) which both listed earlier this year.

Fund fights: Global X Uranium UCITS vs Sprott Uranium Miners UCITS

Currently, both ETFs are only classified as Article 6 under the Sustainable Finance and Disclosure Regulation (SFDR) and it is not yet known if this will change following the vote.

John Ciampaglia, CEO of Sprott Asset Management, said: “We believe nuclear energy will be part of the solution given its low carbon footprint and reliable base load energy production. Institutional investors in Europe have been waiting on the sidelines for this to be approved.

“We would expect this ruling will pave the way to greater investment in nuclear energy, uranium and uranium mining companies.”

He added significant progress was needed to achieve the Paris Agreement’s decarbonisation goals of limiting global warming by 1.5°C to 2°C, with a move to renewable energy sources likely to “barely move the needle”.

“By contrast, nuclear power has the potential to provide high-impact change that can significantly move the needle. Given that nuclear power can provide an appealing solution, sentiment has turned much more positive in recent years,” he said.

Despite this, environmental lawyers have signalled their intention to take the European Commission to court, for adopting a taxonomy that does not comply with the Paris Agreement.

Laurence Tubiana, CEO of the European Climate Foundation, said: “With gas in the taxonomy, the European Union has missed its chance to set a gold standard for sustainable finance. Instead, it has set a dangerous precedent. Politics and vested interests have won over science.

“The EU taxonomy now falls short of its own initial goal, which was to prevent greenwashing in the financial system. Investors, companies and consumers, will now be looking elsewhere for the science-based clarity and credibility they need.”

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