EU Commission pushes forward sustainable financing

Sustainability Dialogue: Financing & Investing
The EU Commission and its working groups have provided guidelines for funds and banks to set up sustainable financing in praxis. A EU Action on sustainable finance was published.

The EU Commission has set up several working groups such as the High-Level Expert Group on Sustainable Finance (HLEG) or the Technical Expert Group on Sustainable Finance (TEG). These working groups have initially (in particular ?) published an action plan and, recently, a comprehensive taxonomy. The taxonomy contains criteria, objectives and methods on how sustainable business practices can be classified in a standardised and transparent way in the future. The corresponding classification report shall offer, to the affected companies and investors, the opportunity to analyze the implications of the new taxonomy for their businesses and products. Furthermore, there are already first draft regulations changing single aspects of financial market regulation to promote sustainable financing.

What are the current official publications on Sustainable Finance?

The EU Commission and its working groups have published several publications: 

  • Sustainable Finance Framework: These publications set out uniform criteria for determining whether an economic activity is environmentally sustainable. They further set out a process involving a multi-stakeholder platform to establish a unified EU classification system based on a set of specific criteria for determining which economic activities are considered sustainable (Taxonomy). Read more: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en
  • Disclosures relating to sustainable investments and risks: Investment firms and insurance intermediaries should consider ESG a value driver adding worth to the advice which the insurance intermediaries are required to provide to investors, as it ensures that the investors will receive the relevant Information. Furthermore, to help investors compare the carbon footprint of investments, the publications introduce new categories of low carbon and positive carbon impact benchmarks. Most recently, the European Supervisory Authorities (ESAs) have proposed technical standards on what will need to be disclosed under the Sustainable Finance Disclosure Regulation (SFDR). This means, that on June 30, 2021, the very latest date by which a large Financial Market Participants can start to report, they must publish a statement on their website describing the policies in place to assess principal adverse sustainability impacts and any actions taken to address these impacts. Read more: https://www.esma.europa.eu/press-news/esma-news/esas-consult-environmental-social-and-governance-disclosure-rules
  • Low carbon and positive carbon impact benchmarks: To help investors compare the carbon footprint of investments, the publications introduce new categories of low carbon and positive carbon impact benchmarks.
  • MiFID II related updates: These publications aim at integrating ESG considerations into the investment and advisory process in a consistent manner across sectors by amending MiFID II.
  • IDD related updates: Customer’s ESG preferences should be taken into account by insurance intermediaries and insurance undertakings when assessing the suitability of insurance-based investment products.
  • Green bond standard: These publication describe a voluntary, non-legislative EU Green Bond Standard to enhance the effectiveness, transparency, comparability and credibility of the green bond market and to encourage the market participants to issue and invest in EU green bonds. Read more: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-green-bond-standard_en

Additionally, the EU and its working groups have published several publications.

As part of the Green Deal, the Commission presented on 14 January 2020 the European green deal investment plan, which will mobilise at least €1 trillion of sustainable investments over the next decade. It will enable a framework to facilitate public and private investments needed for the transition to a climate-neutral, green, competitive and inclusive economy.

The Commission has developed a comprehensive policy agenda on sustainable finance since 2018, comprising the action plan on financing sustainable growth and the development of a renewed sustainable finance strategy in the framework of the European Green Deal. The Commission is also coordinating international efforts through its International platform on sustainable finance.