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Commission released action plan on sustainable finance

The European Commission unveiled March 2018 its strategy for a financial system that supports the EU’s climate and sustainable development agenda. The Action Plan on sustainable finance is part of the Capital Markets Union’s efforts of the EU to connect finance with specific needs of the European economy.

European Commission: Action Plan on Green Finance
8 March 2018
Bundesbank Symposium on Sustainability
7 March 2018
Views European Banking Federation and Finance Watch

Sustainable finance: Commission’s Action Plan for a greener and cleaner economy

According to the EC, the Action Plan on sustainable finance is part of the Capital Markets Union’s (CMU) efforts to connect finance with the specific needs of the European economy to the benefit of the planet and our society. It is also one of the key steps towards implementing the historic Paris Agreement and the EU’s agenda for sustainable development.

Key features of the Action Plan

In 2017, the Commission appointed a High-Level Expert Group on sustainable finance to elaborate a comprehensive set of recommendations for the financial sector to support the transition to the low-carbon economy. Inspired by their final report, the Commission is proposing an EU strategy on sustainable finance setting out a roadmap for further work and upcoming actions covering all relevant actors in the financial system. These include:

  • Establishing a common language for sustainable finance, i.e. a unified EU classification system – or taxonomy – to define what is sustainable and identify areas where sustainable investment can make the biggest impact.
  • Creating EU labels for green financial products on the basis of this EU classification system: this will allow investors to easily identify investments that comply with green or low-carbon criteria.
  • Clarifying the duty of asset managers and institutional investors to take sustainability into account in the investment process and enhance disclosure requirements.
  • Requiring insurance and investment firms to advise clients on the basis of their preferences on sustainability.
  • Incorporating sustainability in prudential requirements: banks and insurance companies are an important source of external finance for the European economy. The Commission will explore the feasibility of recalibrating capital requirements for banks (the so-called green supporting factor) for sustainable investments, when it is justified from a risk perspective, while ensuring that financial stability is safeguarded.
  • Enhancing transparency in corporate reporting: we propose to revise the guidelines on non-financial information to further align them with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

See also:
Final report of the High-Level Expert Group on Sustainable Finance
Sustainable Finance: EBF says Banks urge clarity in EU Action Plan
Finance Watch analysis of the HLEG recommendations on Sustainable Finance

Bundesbank symposium 7.3.2018 “Banking supervision in dialogue”

Speeches and discussions:
Andreas Dombret, Board Member Deutsche Bundesbank, “Greener finance – better finance? How green should the financial world be?
Klaas Knot, Gouverneur De Nederlandsche Bank N.V., Keynote Speech, “From Mission to Supervision”
Moderated discussion between Klaas Knot and Andreas Dombret