MTK’S POSITION TO THE Inception Impact Assessment on Sustainable Finance – EU Classification System for Green Investments

Takaisin MTK’S POSITION TO THE Inception Impact Assessment on Sustainable Finance – EU Classification System for Green Investments

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MTK’S POSITION TO THE Inception Impact Assessment on Sustainable Finance – EU Classification System for Green Investments

20.04.2020

The Central Union of Agricultural Producers and Forest Owners (MTK) is an interest organisation representing farmers, forest owners and rural entrepreneurs in Finland. MTK has over 316 000 members in local agricultural producers’ organisations and regional forest management associations. All of the occupations and businesses of our members are based on renewable natural resources and their utilisation in a sustainable and economical way. Regional activities and lobbying are carried out by 14 regional MTK unions and 62 forest management associations.

It is important that the taxonomy report of the TEG Sustainable Finance recognises the principles of the EU Forestry Strategy, both the benefits of sustainable forest management and the multifunctional role of forests. The forestry is part of national policy area because of the differences in natural conditions. We highlight once again that taxonomy criteria should respect this shared competency between the Union and the Member States on forestry issues, respect sustainable forest management practices covered and defined in Forest Europe process and must not undermine the role of forests in bioeconomy replacing fossils in the climate battle. In this respect, the scope of the taxonomy has to be enlarged as soon as possible to include “enabling” activities involving long-lived and harvested wood products and not just to protect and enhance forest carbon stocks and sinks.

In our Finnish economy forestry is essential part of the whole society and for our forest owners a diverse use of forests, including social and economic sustainability circural-bioeconomy, is outmost important. The sustainable investment framework should recognize and enabled it, which on its behalf means climate friendliness and ensures researching the targets of Paris Agreement. The risk of carbon leakage to third countries in the short and mid-term is obvious if investment cost rises in the EU.

For agriculture the proposed farm sustainability management tool could be useful only if it is directly integrated with CAP measures. The reporting should be connected to the controls of the CAP. It is the only way how to reduce the monitoring, reporting and verification workload at farm level. In addition, the sustainable criteria and the DNSH-level should be integrated to the CAP criteria. At least the new eco-schemes and agro-environmental programs should fulfil the sustainable criteria as such, not only the DNSH-level. Otherwise to demonstrate compliance with sustainable finance technical screening criteria is far too expensive for the farmers which are not directly benefiting for the sustainable financing tools.

MTK emphasises that the incentive for the investments to low-carbon economy should mainly come from the market, but in respect to investments the financing sector plays an essential role to encourage sustainable investment and not discourage it by cost overload. It seems that by increasing sustainable criteria are well beyond the CAP a substantial part of the agricultural sector or food value chain will not be able to benefit from sustainable finance tools. However, agriculture and forestry are contributing to climate change mitigation and adaptation.

There are 600000 private forest owners in Finland. Due to long rotation period (60 – 80 years) in the Nordic forestry they have a strong sense of stewardship for their forest land as they are managing it for their children. These numerous forest owners are suppliers of wood raw material for the few forest-based globally active companies or biorefineries.

The sourcing area of our forest-companies should be defined for the whole of Finland. So Finnish sustainable forest management (SFM) is the basis of the Finnish national legislation. The carbon sequestration in our forests is screened with the accurate national forest inventory data reaching over decades. This data is national and can well be used to calculate the carbon stock in forests.

The taxonomy report refers several times that management practices have to be audited and reported in a three year or ten years interval. Especially on forestry it is not well rationalised why this kind of reporting is needed nearly ten times in one rotation period. On forestry there is reference to REDII and LULUCF, where it is possible to use Member State level reporting as a sourcing area. From MTK’s point of view it is the only rationale way to go on. And the same is with the CAP controls and reports of the food value chain.

In this respect existing reporting should be used and, if needed, adapted to ensure a reasonable cost-benefit-ratio. Otherwise for the small and medium size farms and forest owners the administrative and economic burden of a proper audit is most probably in no relation to the benefit a farmer gets. We acknowledge that reporting and verification is necessa