ESG Investing

Is Nuclear Energy Green? The EU Parliament Says Yes, Driving Investment

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A European energy crisis driven by the war in Ukraine has helped catapult nuclear power into the realm of sustainable investing. Europe, at least, has raised the question—is nuclear energy green?—and appears to have decided in nuclear power’s favor. Somewhat controversially, the European Union (EU) Parliament in June included nuclear power in its taxonomy as a green investment alongside renewables like solar and wind power.

The change brings important implications for energy investment, particularly as EU countries struggle to retool their energy systems in the rush to replace Russian gas imports.

Ukraine War Shifts Thinking

Nuclear power has been an especially divisive topic in Europe for decades. France has been keen to label it green; Germany has generally adopted a negative stance on nuclear power, with plans to completely decommission its remaining nuclear power plants by the end of 2022.

However, with no end in sight to the war in Ukraine and a full-blown energy crisis across Europe beginning to set in even ahead of peak winter demand, the European Parliament voted in favor of including nuclear power in its taxonomy. Even Germany appears to be backtracking on its previous commitment to end nuclear power in the country as the government considers extending the life of its remaining nuclear power plants. Germany also enacted legislation earlier this year to reinstate previously mothballed coal-fired power plants after Russia abruptly reduced gas supplies.

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Implications for Investors

What gets defined as “green” through the EU’s taxonomy classification should influence investment decisions for years to come. Within the EU alone, there is more than €3 trillion in ESG assets under management, and European-domiciled ESG assets are poised to reach as much as €9 trillion by 2025.

More ESG funds may allow investment in nuclear power as a result of the EU Parliament’s decision, and a growing amount of green bonds are likely to be issued to finance new nuclear power plants. That’s particularly good news for France, as the country has by far the biggest reliance on nuclear power in the EU. French nuclear power company EDF works as a catalyst for nuclear technology transfer across Europe, including a new €40 billion nuclear power plant in the UK that is currently under construction.

The move may also help drive investment toward new kinds of nuclear reactors. For instance, “fast nuclear reactors” reuse nuclear waste for fuel—thereby closing the fuel cycle—and public and private entities have been investing billions in nuclear fusion over the past few years.

Long-Standing Concerns Remain

Old concerns remain about nuclear power. Opposers point to nuclear accidents from across various parts of the world over the years. Proponents, on the other hand, stress new, more advanced reactor designs and stronger regulations. Furthermore, the European Commission has attempted to quash additional worries about nuclear waste by only allowing nuclear power plants to be built if countries can demonstrate they can safely dispose of nuclear waste.

Getting off of Fossil Fuels

Is nuclear energy green? In the short term, nuclear may help governments move away from fossil fuels and keep the rise in global temperatures to below the 2 °C target compared with pre-industrial levels. Despite the rapid growth in technologies such as solar and wind, renewable energies still have a long way to go to produce enough to meet demands. Nuclear may be able to plug the gap.

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