The high-level expert group on sustainable finance last week published its final recommendations to re-channel the flow of capital into sustainable investments (see EUROPE 11951). Overall, the stakeholders believe the report is a “step in the right direction”, but the degrees of satisfaction vary.
One of the first to react to the publication of the report - and unquestionably the harshest critic - is the organisation that defends the interests of European consumers of financial products, Finance Watch.
Calling on the EU to be more ambitious, its Secretary General, Benoît Lallemand, said that transforming the business models of large financial institutions in this way “goes far beyond the HLEG recommendations”.
In particular, the organisation considers that in order to redirect capital into sustainable investments, a taxonomy as proposed in the report will not be enough. What it feels is needed is a clear economic orientation and an EU adaptation plan.
The European Federation of Investors and Financial Services Users, Better Finance, finds that the report lacks ambition in terms of information and governance for sustainable financial products.
Although it supports the idea of European label for sustainable financial products in principle, it nonetheless considers that such a label must comply with the investor protection rules. What must be avoided at all costs is any misuse of the ‘environmental, social and governance’ criteria, leading to a circumvention of the investor protection rules, it explained.
Reactions from the banking industry were mixed and, here again, more clarity is called for. The relevance of setting in place reduced own funds requirements for banks in order to stimulate green investments and loans (‘Green Supporting Factor’) was much discussed in particular. Although the Commission supports this (see EUROPE 11924), the expert group does not recommend it, instead calling upon the Commission to investigate the existence of a risk differential justifying this factor, whilst also raising the idea of a ‘Brown Penalising Factor’.
“The introduction of a green supporting factor or a brown punishing factor should not contribute to unbalancing risks in the financial system. It is extraordinarily difficult to create proper definitions that are not at odds with the need for accuracy and purity in risk weights in banking”, the European Banking Federation warns in a press release.
The WWF, for its part, was more positive. The director of the French bureau of this organisation, Pascal Canfin, is a member of the expert group and has stated that the European Commission should implement all of the recommendations of the report, which make up an integrated whole.
This satisfaction is echoed by the European Parliament, where an own-initiative report is currently being drawn up by MEP Molly Scott Cato (Greens/EFA, UK), which is expected to be adopted in April. When the report was presented by the Chair of the expert group, Christian Thimann, to Parliament's committee on economic and monetary affairs on Thursday 1 February, it congratulated the experts on their work, whilst acknowledging that the “devil is in the detail”. It was particularly pleased to note a credible taxonomy and a clarification of the obligations of investors.
All parties now await the action plan to be presented by the Commission in March and the first concrete initiatives to stem from it in May onwards. (Original version in French by Marion Fontana)