Paul Chisnall, Director, Finance & Operations Policy

The European Commission (EC) is today holding a high-level conference on financing sustainable growth at which it will present its Action Plan for Sustainable Finance. Hosted by Jean-Claude Juncker, President of the European Commission, and Vice-President Dombrovskis, and with French President Emmanuel Macron providing a keynote speech, the event sends a strong political signal of the intention of the EU to place sustainable finance and climate at the heart of its economic strategy.

The Action Plan is part of broader efforts to connect finance with the needs of the European and global economy with the aim of:

  • Reorientating capital flows towards a more sustainable economy
  • Streamlining risks stemming from climate change, resource depletion, environmental degradation and social challenges
  • Fostering transparency and long-termism in financial and economic activity

It builds on the recommendations of the EC high-level expert group on sustainable finance published on 31 January 2018, and sets out 10 action streams:

  • Establishing an EU classification system or taxonomy for sustainable finance.
  • Creating standards and labels for green financial products.
  • Fostering investment in sustainable projects.
  •  Incorporating sustainability into financial advice.
  • Developing sustainability benchmarks.
  • Integrating into ratings and market research.
  • Clarifying the duties of institutional investors and asset managers.
  • Incorporating sustainability into prudential requirements.
  • Strengthening sustainability disclosure and rule-making.
  • Fostering sustainable corporate governance and attenuating short-termism.

Appendix IV illustrates this as:

Climate remains at the core of the programme as witnessed by the presence of Michael Bloomberg, UN Special Envoy for Cities and Climate Change, and the focus upon the transition towards a low carbon, circular and energy efficient economy.

It is encouraging to see that the Action Plan includes consideration of a recalibration of capital requirements of banks under the Capital Requirement Regulation and Directive – what’s been dubbed ‘green’ and ‘brown’ factors. Not unreasonably, this is dependent upon the ability to develop a coherent approach based upon reliable data and the prospect of the taxonomy delivering a common base.

The roadmap for 2018 and 2019 aims to make concrete steps on the climate-related taxonomy and Ecolabeling and in the process set the course for sustainability sitting at the heart of the EU’s economic strategy.

It is also intended that recommendations of the FSB-sponsored Taskforce on Climate-related Financial Disclosure (TCFD) be given firmer statutory recognition.

Green shoots!