The European Commission's High-Level Expert Group on Sustainable Finance has published its recommendations for a financial system that supports sustainable investment.
The key proposals contained in the report are:
- a classification system, or 'taxonomy', to provide market clarity on what is 'sustainable';
- clarifying the duties of investors' when it comes to achieving a more sustainable financial system;
- improving disclosure by financial institutions and companies on how sustainability is factored into their decision-making;
- an EU-wide label for green investment funds;
- making sustainability part of the mandates of the European Supervisory Authorities (ESAs); and
- a European standard for green bonds.
Financial sector key to Paris targets
The EU strategy for sustainable finance forms a key part of EU and global goals, including those of the Capital Markets Union and the Paris Agreement to tackle climate change. The Commissions makes it clear in its statement that sustainable investment will play an important part in reducing carbon emissions and providing the huge sums needed - €180 billion each year, in addition to current levels of investment – to achieve sustainability and climate goals in the next 12 years. It stated: “To achieve the EU's 2030 targets agreed in Paris, including a 40 per cent cut in greenhouse gas emissions, we need around €180 billion of additional investments a year. The financial sector has a key role to play in reaching those goals, as large amounts of private capital could be mobilised towards such sustainable investments. The Commission is determined to lead the global work in this area and help sustainability-conscious investors to choose suitable projects and companies.”
Need for clarity on green investments
The proposals set out in the report will form the basis of the Commission's Action Plan on sustainable finance, to be announced in March 2018. The aim of the group on sustainable finance is that the financial sector should play a key role in meeting the targets set by the Paris Agreement and the EU's own sustainability goals. According to group's chair, Christian Thimann, establishing an EU Sustainability Taxonomy is a priority to ensure market consistency by means of a classification system to make clear the criteria for sustainable investment products.
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