European Commission's Action Plan for a greener and cleaner economy follows HLEG’s recommendations

The European Commission has unveiled its strategy for a financial system that supports the EU's climate and sustainable development agenda.

In late 2016, the European Commission announced the members of a High-Level Expert Group (HLEG) on sustainable finance, which was tasked with developing a comprehensive strategy in this field for the European Union.

The group has 20 members from civil society, the financial sector and the academic world. One of these is Philippe Zaouati, CEO of Mirova, an affiliate of Natixis Investment Managers dedicated to sustainable investment. Philippe Zaouati is also president of Finance for Tomorrow, an initiative sponsored by Paris EUROPLACE and Paris market participants to promote sustainable finance in France and internationally.

After one year of work, the HLEG released its final report on 1 February 2018 (which you can view here). Inspired by their final report, the European 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 ESG reporting.

The next step is the presentation to the stakeholders of the European Commission’s comprehensive Action Plan on sustainable finance, due out on 22 March 2018.

For Further Reading:

• Analysis of HLEG’s final recommendations by Philippe Zaouati, CEO at Mirova, Chair at Finance For Tomorrow