With the publication, on Wednesday 31 January, of the final recommendations of the high-level expert group on sustainable finance, the European Commission can now finalise its strategy for an in-depth transformation of the European financial system, to redirect capital flows into sustainable investments.
The experts, who describe themselves as the “artisans of change”, have set themselves the ambitious target of “building the world’s most sustainable financial system”.
The 100-page report lists eight priority actions and a number of recommendations, some aimed at specific sectors and others more general.
Establishing a European taxonomy. The experts argue that the first stage in the work must be to create a financial taxonomy to establish clearly what is “green” and “sustainable”, and that this should be done by 2020.
This classification, which already got a mention in the group’s interim report published in July of last year (see EUROPE 11830), will help to identify the conditions under which an investment or financial product can make a contribution to the EU’s sustainability targets.
Clarifying investors’ obligations. The experts also call upon the Commission to introduce an obligation in European legislation to ask all individual customers seeking a savings product about their sustainable development preferences. To do this, they recommend an ‘omnibus’ legislative proposal, to ensure that these changes are embedded throughout the investment chain.
They warn that “if this proposal is implemented in a partial or a voluntary way, the regulatory situation will not make sufficient progress on driving sustainability across the investment chain”.
Developing European sustainable finance standards. To begin with, the EU should adopt a European standard on green bonds, before going on to look at developing a green bond label, the experts consider. To do this, the group advises the Commission to begin work this year on setting up a Green Bonds Technical Committee.
It is worth noting that in its report, the group proposes that issuers be permitted to use the term ‘EU green bond’ only if certain criteria are met, for instance that the product is used exclusively to finance or refinance eligible green projects and that an independent external assessor has verified that it is in line with European green bond standards.
The group also proposes to improve access to information, promote financial literacy and put into place ‘Sustainable Infrastructure for Europe’, to provide advice on how to mobilise resources to carry out sustainable infrastructure projects.
A Commission action plan in March. Welcoming the work of the experts, the Commission has issued a press release announcing that it will propose an action plan and legislative proposals in this area in March, on the basis of the group’s recommendations.
Speaking from Dublin, where he was addressing the European Financial Forum, European Commissioner Valdis Dombrovskis described this report as a manifesto for in-depth reform. In December, he announced his first orientations for a future action plan (see EUROPE 11924), including a number of recommendations featuring in this report.
“2015 was the year of the Paris Agreement, 2016 the year of its ratification, 2017 the year that saw a group of 20 working on its transposition. We hope the 2018 will be the year of its implementation”, the group’s chairman, Christian Thimann told the press at the presentation of the report, which is available at: http://bit.ly/2DQ91EN . (Original version in French by Marion Fontana)