EU Taxonomy Update - Inclusion of Natural Gas and Nuclear

The European Commission has released new plans to include some natural gas and nuclear energy power plants as ‘green’ under the existing EU Taxonomy’s Climate Change Mitigation objective. Despite the political pressure the new proposal appears likely to pass, leading to implications for corporates and investors. Goldman Sachs Research believes the inclusion of natural gas and nuclear power generation would help provide some guarantee to Europe’s volatile energy supply, especially as renewables scale and potentially provide an incentive for natural gas to play a larger role in Big Oils transition to Big Energy, helping drive an acceleration in the phasing out of coal. Investors’ recognition of nuclear and gas-fired powered generation as green is likely to remain somewhat tempered by existing exclusions in ESG funds, but their inclusion into the EU Taxonomy now opens the door to more nuanced views, potentially giving more credit to the technologies where they meet the strict performance criteria of the Taxonomy.