EU Sustainable Finance, season 2

by | 8 Apr 2020 | Sustainable Finance

Today the European Commission showed it is pushing forward on greening finance by launching an insightful public consultation on the EU’s new sustainable finance strategy, almost sticking to the planned timing despite the coronavirus outbreak. 

This consultation is the first stage of the EU’s Renewed Sustainable Finance Strategy announced with the Green Deal, the complete framework being expected in autumn 2020.

In its introduction to the consultation paper, the European Commission makes a reference to the ongoing COVID-19 outbreak which “underscores some of the subtle links and risks associated with human activity and biodiversity loss”.

“It is important – now more than ever – to address the multiple and often interacting threats to ecosystems and wildlife to buffer against the risk of future pandemics, as well as preserve and enhance their role as carbon sinks and in climate adaptation.” 

I believe this is the first time the link between climate change and biodiversity exhaustion is highlighted as clearly in an official communication ….

The European Green Deal Investment Plan – also called Sustainable Europe Investment Plan – announced on 14 January 2020 aims to mobilise public investment and help to unlock private funds through the EU budget and associated instruments, notably through the InvestEU programme. See my paper here.

However, the financial system as a whole is not yet transitioning fast enough.

Substantial progress still needs to be made to ensure that the financial sector genuinely supports businesses on their transition path towards sustainability, as well as further supporting businesses that are already sustainable.

For all of these reasons, the European Green Deal announced a Renewed Sustainable Finance Strategy which will predominantly focus on three areas: (i) strengthening the foundations for sustainable investment by creating an enabling framework, with appropriate tools and structures ; (ii)  increasing opportunities to have a positive impact on sustainability for citizens, financial institutions and corporates; (iii) fully managing and integrating climate and environmental risks into financial institutions and the financial system as a whole, while ensuring social risks are duly taken into account where relevant.

This consultation builds on a number of previous initiatives and reports, as well as complementing other consultation activities of the Commission, in particular:

  • The final report of the High-Level Expert Group on Sustainable Finance (2018);
  • The EU Action Plan on Financing Sustainable Growth (2018);
  • The communication of the Commission on “The European Green Deal” (2019);
  • The communication of the Commission on “The European Green Deal Investment Plan” (2020);
  • The reports published by the Technical Expert Group on sustainable finance (TEG) with regard to an EU taxonomy of sustainable activities, an EU Green Bond Standard, methodologies for EU climate benchmarks and disclosures for benchmarks and guidance to improve corporate disclosure of climate-related information. (see EU taxonomy for dummies)

This consultation also makes references to past, ongoing and future consultations, such as the public consultation and inception impact assessment on the possible revision of the Non-Financial Reporting Directive (NFRD : my paper here), the inception impact assessment on the review of the Solvency II Directive or the future consultation on investment protection

As usually, respondents are encouraged to provide as much evidence as possible.

The consultation will remain open until July 15, 2020.

Iconography: spring is coming, personal collection