EU Taxonomy and Nuclear Energy: An uneasy truce

Synopsis: There is an important role of power politics in the development of the proposals of the EU Taxonomy. For example, there are questions regarding whether ‘scientific truth’ took a backseat to ‘political acceptability’ when it came to nuclear energy. On the issue of whether nuclear energy should be included in the category of industries under sustainable finance, there are significant differences among the members. The European Commission has faced tremendous pressure from financial and industry lobbies, industry associations, and political representatives. There are also allegations that large corporates were pushing to weaken what qualifies as a sustainable energy source. Already, the Technical Expert Group on Sustainable Finance did not provide a conclusive recommendation on nuclear energy and indicated that a further assessment of ‘do no significant harm’ aspect of nuclear was necessary. The road ahead is hardly smooth because some EU states such as France are very strongly advocating that nuclear energy should be supported under the EU Taxonomy rules, while some other very powerful and influential members like Germany are strongly opposed to it. Any final decision on nuclear power in the EU Taxonomy will be a test of the political willpower of stakeholders and how they master the art of making compromises without diluting their stand completely.

EU Taxonomy: The Big step forward

Among all the economic blocks globally, the European Union (EU) has been the most proactive in dealing with the challenges the world collectively is facing, in particular the challenge of ‘climate change’ which has been under focus for the EU. To address the issues related to damage to the environment and climate change, the European Commission has developed a classification system to provide more clarity to the companies on the economic activities in terms of where they stand on environmental sustainability.

This system is called the EU Taxonomy and it has an objective to nudge the companies operating in the EU to report on and disclose how their business activities are aligned with the EU Taxonomy’s definition of what is sustainable and what is not. To the best possible extent, the EU taxonomy wants to create a level playing field for businesses in terms of how they report the information and relevant data. If done effectively, this will help investors in making better choices on the companies’ efforts to control damage to the environment.

The European Commission believes that at the very fundamental level, Sustainable Finance is about re-orienting investment towards sustainable technologies and businesses, and hence, it is an essential part of the European Green Deal, the core plan to achieve climate neutrality by 2050. The European Commission believes that major public and private investment is needed to make the financial system sustainable. And this is where the EU Taxonomy plays an important role. Because it is the basic fundamental over which this entire premise of promoting Sustainable Finance in the EU is built.

As per the European Commission, the EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. The EU taxonomy is an important enabler to scale up sustainable investment and to implement the European Green Deal. Notably, by providing appropriate definitions to companies, investors, and policymakers on which economic activities can be considered environmentally sustainable, it is expected to create security for investors, protect private investors from greenwashing, help companies to plan the transition, mitigate market fragmentation and eventually help shift investments where they are most needed.

EU Taxonomy and the controversy over Nuclear Power

The topic of nuclear energy in the EU taxonomy was a much-debated subject throughout the negotiations on the Taxonomy Regulation. And, finally, the debate hit a dead end. The Technical Expert Group on Sustainable Finance did not provide a conclusive recommendation on nuclear energy and indicated that a further assessment of ‘do no significant harm’ aspects of nuclear was necessary.

The task, of course, is not easy. For example, the following chart explains why the Sustainability discussions will find it difficult to put ‘nuclear energy’ in a particular pre-defined bucket. Despite all the negative perceptions, nuclear is still very competitive on GHG emissions. This gives further support to people advocating nuclear energy’s inclusion in the EU Green deal.

Figure 1: GHG Emissions for Different Technologies

Source: Technical assessment – Nuclear with respect to ‘do no significant harm’ criteria of Regulation (EU) 2020/852 (‘Taxonomy Regulation’)

The politics of Nuclear Power

While the EU is showing strong global leadership in becoming climate-neutral by 2050, achieving the same also requires taking a call on Nuclear Power. The positive part is that the European Union is in no hurry to arrive at some hasty conclusions and wants to explore all possible aspects before taking a final call. However, doing so won’t be easy because some EU states are very strongly advocating that nuclear energy should be supported under the EU Taxonomy rules.

August 2021

The popular opinion on nuclear is very much country-specific. For example, a majority of Germans see no place for nuclear power in sustainable investments. This is the result of a survey conducted by research group Forsa on behalf of Berlin-based consumer protection organization Finanzwende Recherche (Finance Transition Research). Sustainability standards that do not explicitly exclude nuclear power are not trusted in Germany; the organization has found.

“The European Commission should take this knowledge into account when it presents details on the classification of sustainable investments in the autumn,” it states. Nuclear is a controversial subject due to the conflicts between the EU member states – for example, France is a leading advocate for nuclear power and these differences in opinion have led to delays in a decision on whether nuclear power should be defined as sustainable, Finanzwende Recherche highlighted.

July 2021

The European unions have reiterated calls for the European Commission (EC) to include nuclear power in its green goals. In a joint letter to EC President Ursula von der Leyen dated 27th July, 18 trade unions from 10 countries said nuclear energy must be included in a delegated act of the European taxonomy. The unions – from Belgium, Bulgaria, Czech Republic, Finland, France, Hungary, Romania, Sweden, Slovak Republic, and Slovenia – called for this inclusion. The unions called for “a dialogue with the purpose of nuclear energy to play its full potential and build an economically efficient and socially just carbon-free Europe by 2050”.

“The European Union can in no way afford to deprive itself of proven and available low-carbon solutions as it wants to achieve its climate neutrality objective and not lose the leadership battle to the US and other states,” the letter noted. “Our trade union federations also point out that the energy mix falls within the competence of the Member States, each of which has its own geographical, historical and industrial context, and must therefore be able to determine the range of carbon tools adapted to their context and make their own technological choices. Therefore, it is of utmost importance that the European taxonomy respects technological neutrality and scientific consensus, and the taxonomy rules should apply equally to all technologies.”

Separately, in July, eighty-six members of the European Parliament requested the European Commission “to follow the science” and include nuclear under the EU’s Sustainable Finance Taxonomy. According to a letter sent to Commissioners and published by the European nuclear trade body Foratom, these members urged them “to choose the path that their scientific experts have now advised them to take”, to include nuclear power in the EU’s Taxonomy on Sustainable Finance. These developments are just the latest in a series related to the issue of including nuclear in the EU Taxonomy green deal.

June 2021

On 30th June, a group of five EU member states sent a letter to the EC asking for nuclear energy to be kept out of the EU’s green finance taxonomy. The letter, which was signed by the ministers from Austria, Denmark, Germany, Luxembourg, and Spain, noted “shortcomings” in the report by the JRC. “Nuclear power is incompatible with the Taxonomy Regulation’s ‘do no significant harm’ principle,” the letter said, urging the Commission to keep nuclear out of the EU’s green finance rules. “We are concerned that including nuclear power in the Taxonomy would permanently damage its integrity, credibility and therefore its usefulness,” they warned.

March 2021

In March 2021, the leaders of seven European Union Member States wrote to the European Commission on the role of nuclear power in the EU climate and energy policy. The states argued that the path that was currently laid out to achieve the goal for the EU left little room for internal policy-making which, naturally, were determined by country-specific conditions. Because of this, every Member State should remain free to develop nuclear power or refrain from it.

The leaders, including Mr. Andrej Babiš (Prime Minister of the Czech Republic), Mr. Emmanuel Macron (President of the French Republic), Mr. Viktor Orban (Prime Minister of Hungary), Mr. Mateusz Morawiecki (Prime Minister of the Republic of Poland), Mr. Florin Cîțu (Prime Minister of Romania), Mr. Igor Matovič (Prime Minister of the Slovak Republic) and Mr. Janez Janša (Prime Minister of the Republic of Slovenia) supported Nuclear Power by highlighting;

  • Nuclear Energy’s contribution to fighting climate change and hence, the need for a true level-playing field for nuclear power without excluding it from the EU climate and energy policies.
  • A huge range of possibilities and yet unexploited synergies between nuclear energy and renewable technologies.
  • All available and future zero and low-emission technologies have to be treated equally within all policies, including the taxonomy of sustainable investments.
  • As low-emission baseload, nuclear guarantees the continued renewable deployment to much higher penetration levels.
  • Nuclear power seems a promising source of low-carbon hydrogen at an affordable price and can play an important role in energy sector integration.
  • Nuclear power also generates a considerable number of stable, quality jobs, which will be important in the post-COVID recession.

January 2021

In January 2021, thirteen unions representing energy and nuclear workers wrote to Ursula von der Leyen saying, nuclear energy must be part of the European taxonomy. The exclusion of nuclear power, they said, would not only have a negative impact on the nuclear industry in Europe but also on electricity-intensive industries in the region.

How EMAlpha can help?

There are several areas where there is no consensus on what the major stakeholders in EU Taxonomy think. Apart from nuclear energy, there are also questions on the status of Gas as a source of energy and its future in the region and forestry. Similarly, some of the countries want to support their local industries and that is not surprising even if that objective is inconsistent with the overall goal of EU Taxonomy and its provisions. The ongoing debate on nuclear is just one example here.

While the EU Taxonomy regulations will be playing a key role in shaping the sustainable finance industry, there are challenges as well. For example, this requires that the ESG ecosystem needs to be better prepared. At EMAlpha, we have incorporated a Flexible Framework Management System, based on EMAlpha’s proprietary technology making inferences framework agnostic. This also offers a quick adaptation for the users (asset managers, companies, and investment advisors).

As such, the EMAlpha’s ESG and Sustainability offering is centered around addressing some of the most critical issues. The EMAlpha algorithms provide a choice for separate relevant frameworks and these can be used to review the performance more transparently. This not only helps the investment advisors but also makes the clients understand the granular details better which in turn is helpful for them to understand their preferences better. To achieve this, we focus on the following;

  • Go beyond the official reported version – The data source matters and there is a need to look beyond what the companies are reporting and what the official version is. It is essential to rely on the company-reported data because other sources might not be collating as much information. Although often, there are other sources as well for environment-related information. They include the information disclosure as mandated by regulators and EMAlpha algorithms scan through unstructured data to pick up the unofficial information as well.
  • No two ESG scores are the same despite the same headline figure – It is the composition that makes a big difference and all the three parameters that make up ESG need to be evaluated separately. The EMAlpha algorithms provide separate scores for E, S, and G so that an investor can review the sectoral performance more transparently. Over and above, a key feature of EMAlpha’s NLP algorithms is that the attribution analysis is fairly simple and straightforward.
  • An ESG score without context and background is meaningless – The ESG is as much about intent as it is about execution. For this balanced evaluation, having an understanding of the local factors is very crucial. A very good ESG track record (probably more driven by excellent performance in E and/or S) may hide serious Governance related risks and the investors can only ignore them at their own peril. EMAlpha analysis meticulously incorporates this critical part of the ESG evaluation jigsaw puzzle.


  1. MEP Canfin: The French hard line on nuclear is a dead end, the hard line is defended by France over the inclusion of nuclear power in the green taxonomy. (Accessed on 25th August 2021)
  2. Draft EU taxonomy sparks discord over gas, nuclear future (Accessed on 25th August 2021)
  3. NGOs demand place for nuclear in EU Taxonomy (Accessed on 25th August 2021)
  4. Message: 7 EU leaders urge support for nuclear,-say-7-EU-leaders (Accessed on 24th August 2021)
  5. Reprieve for Nuclear, Gas in EU’s Sustainable Finance Taxonomy Rules (Accessed on 24th August 2021)
  6. EU spells out criteria for green investment in new ‘taxonomy’ rules (Accessed on 24th August 2021)
  7. BP “lobbying to weaken” EU green investment: watchdog (Accessed on 24th August 2021)
  8. Unions repeat call for Nuclear Energy’s inclusion in EU taxonomy (Accessed on 23rd August 2021)
  9. European Unions call for nuclear to be part of the EU taxonomy (Accessed on 23rd August 2021)
  10. Most Germans reject nuclear power as sustainable investment target (Accessed on 23rd August 2021)

EMAlpha Products and Services

In most Emerging Markets, information discovery is a major challenge. For example, even if global investors do show interest, how do they solve the problem of timely access to information? The world’s largest capital allocators hold USD 60 trillion and they include GPIF (Japan), GPF (Norway), ADIA (Abu Dhabi), GIC (Singapore) etc. However, only 10% of the capital gets allocated to EMs and ~90% goes to G10. The big hurdle for EMs is: Foreign investors cannot access relevant local information in a timely fashion.

Most market participants and investors from across the world realise that the low rates in G10 makes EM attractive for investors. But, a) Information access is usually a cost and time intensive process for investors, and b) In many EMs, language is a big barrier and because of multiple regional languages, there is a significant delay before news makes it to the mainstream English language. To address these issues, you need solutions like, a) Real time news collection from multiple languages and, b) Instantaneous machine translation and text analytics leading to actionable recommendations for investors.

There are further challenges such as ensuring that companies behave responsibly and that they adopt sustainable business practices. There is a need to ensure that the investors are contributing towards making the world a better place by making investment decisions which reward responsible behaviour of companies. Case in point, ESG (Environmental, Social & Governance) which is increasingly being used as a filter for investment decisions. There are other issues as well such as which data to use and a lack of a standardized framework for evaluation.

Some of these issues are too important to be postponed to a later date and it is in this regard that EMAlpha is making its contribution. EMAlpha has developed a Flexible ESG Framework Management System which is a proprietary technology that makes ESG scores framework agnostic, thus allowing for quick adaptation. In addition, the users decide what matters to them and the EMAlpha system does a classification into E, S, G and more granular categories.

EMAlpha also has solutions for Multilingual data collection and real time targeted information which are based on proprietary processes to collect relevant data across multiple markets. The coverage expands across emerging market equity, currencies and commodities and the work has also been very successful in testing the signals in some key markets for live trading strategies. This is a continuous cycle and a virtuous loop that allows for iterative improvement through AI-human feedback.

With developments in AI and technology in areas like NLP, there are considerable new possibilities to bridge the gap in information between Emerging Markets and the more Developed Markets. This is an area which is turning out to be very exciting because some of the tools mentioned were not available even a couple of years ago. This implies that the evolution in the field will only get faster as time goes on. While the Emerging Markets and the Capital Flow Conundrum is a complex one, there is now much more hope and optimism that with the usage of technology, things will only get better.

At EMAlpha, the ESG team is doing further research on why some issues like Social get more prominence as compared to others like Environmental or Governance issues. To look at specific cases in the context of ESG is a very intense yet interesting exercise and this has been an incredible learning experience for the EMAlpha Research team. The data, information and ratings are a humongous challenge for ESG and it takes time to reach to the depth of the issues as the field is evolving very quickly.

EMAlpha is making a solid contribution in tackling these challenges. EMAlpha has solutions for ESG which are practical, user friendly and although not too simplistic yet easy to use. EMAlpha has developed a Flexible ESG Framework Management System which is a proprietary technology that makes ESG scores framework agnostic, thus allowing for quick adaptation. In addition, the users decide what matters to them and the EMAlpha system does a classification into E, S, G and more granular categories.

We strongly believe that the entire ESG ecosystem requires multiple stakeholders to pull in the right direction in order to make it operational and that will be the most critically determining factor for ESG’s success in making the corporate responsibility actually work. Most importantly, the investors should view ‘E’, ‘S’ and ‘G’ individually and should not confound issues when it comes to the comprehensive ESG evaluation. It is important to understand the right reasons behind ESG investing because this bias could hurt their investment decision making and portfolio performance.

Research Team
EM Alpha LLC

For more EMAlpha Insights on Emerging Markets, please visit To know how you can use EMAlpha’s unstructured data and ESG (Environmental, Social and Governance) solutions for better investment decisions, please email us at [email protected].

About EMAlpha:

EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) more accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. EMAlpha works on information discovery and ESG solutions for Investors in Emerging Markets, using AI and NLP tech. Our mission is: “To help increase capital flow, in terms of FDI and FPI, to Emerging Markets by lowering information barriers using AI/NLP”. EMAlpha Products help achieve both alpha and ESG solutions and the idea is to help asset allocators, asset managers, banks and hedge funds along with companies with cost and time efficient access to relevant information. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious. Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.

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