Bowen and Guanio reviewed green and sustainable bond frameworks of “the 30 global systemically important banks” (as defined by the Financial Stability Board) and found that none explicitly included nuclear energy in their sustainable finance taxonomies. Their findings are detailed in “A Critical Disconnect: Relying on Nuclear Energy in Decarbonization Models while Excluding It from Climate Finance Taxonomies.”
“Taxonomy matters because sustainable investing assets under management were estimated to have reached $35 trillion at the end of 2021 and are expected to grow to $50 trillion by 2025,” the authors noted. “Due to the tremendous growth and continued momentum projected for sustainable investment, nuclear energy would likely benefit from being able to access this pool of capital.”
Ambiguity reigns: Climate finance taxonomies purport to identify activities that contribute to mitigation of or adaptation to climate-change-related impacts.
The researchers found that “despite nuclear energy’s potentially critical role in supporting deep decarbonization of the global economy, it is more commonly excluded from climate finance taxonomies, or the taxonomies are ambiguous on the issue. Thus, whether nuclear energy is considered green and sustainable or not varies widely across regions and institutions. For example, as shown in a review of the 30 global systemically important banks, 57 percent have explicitly excluded nuclear energy from their respective green or sustainable financing frameworks’ taxonomies, while 40 percent are silent on its inclusion or exclusion.”
Policies can differ for countries that participate in an intergovernmental organization such as the EU. While the EU includes nuclear in its taxonomy, France and Germany both exclude nuclear as a permissible use of proceeds from recent sovereign green bond issuances, the authors note. And within those countries, individual utilities may have different policies; Électricité de France’s own green bond framework, for example, does include nuclear energy.
The authors report that in the United Kingdom, as of June 2021 the government’s Green Financing Framework explicitly excludes nuclear energy, citing as a reason the exclusion of nuclear energy by many sustainable investors. Multilateral development banks such as the World Bank also exclude nuclear energy, the authors note.
Resolving the disconnect: The authors make several suggestions that could address the disconnect between climate policy and climate finance taxonomies, including the following:
- Groups that develop taxonomies “would likely find it useful” to talk directly with utilities about what it will take for carbon emissions to be eliminated from the power sector by mid-century while maintaining affordability and reliability.
- Climate finance groups could “spend some time understanding the challenges to decarbonization outside of the power sector, where electricity from solar panels and wind turbines does not look as promising in replacing high-temperature heat currently made by burning fossil fuels as nuclear does.”
- Environmental groups “could consider prioritizing the elimination of energy sources with the most negative environmental and public health impacts first.” The authors note that “even remaining neutral on nuclear power’s inclusion in climate finance taxonomies could allay banks’ and investment firms’ concerns about being accused of ‘greenwashing’ if they include nuclear power in their taxonomies.”
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