EU Commission paves way for ambitious strategy on sustainable finance
“The European Commission has confirmed today that a full overhaul of our financial system is required to make it sustainable.
The Commission has also today committed to a few welcome steps to begin that overhaul, such as ensuring those responsible for financial assets take environmental, social and governance issues into account.
Only once sustainability is integrated into the EU’s financial regulatory and policy frameworks, and private capital flows are rerouted towards sustainable investments, will Europe’s finances promote truly sustainable development.
What next? The Commission must produce in early 2018 an ambitious EU integrated sustainable finance strategy with a three year work plan, building on the recommendations of its High-Level Expert Group on Sustainable Finance.This will help transform today’s welcome signals into meaningful changes.”
The Commission published today, 8 June, its Midterm Review of the Capital Markets Union. This follows and improves upon an Action Plan published in September 2015.
The Commission now acknowledges that a deep re-engineering of the financial system is necessary for investments to become more sustainable.
Amongst other measures, the Commission will clarify that fiduciary duties of asset owners and asset managers include Environmental, Social and Governance (ESG) issues, ensure that sustainability is more central to corporate governance and promote better integration of ESG performance in issuer credit ratings and key market benchmarks.
The Commission also commits to working on the integration of sustainability and ESG criteria in rating methodologies and verification systems (such as in green bonds), in supervisory processes as well as investment mandates of institutional investors and asset managers and take sustainability considerations into account in upcoming legislative reviews of financial legislation.
The Commission also refers to the forthcoming recommendations of the High Level Expert Group on Sustainable Finance. On that basis the Commission will decide early 2018 on the concrete follow-up. WWF is calling for this to be an ambitious EU integrated sustainable finance strategy with a three year work plan, including a much needed definition of ESG criteria in order to creates a policy signal and prevent financiers from providing services to companies that engage in unsustainable activities such as violation of human rights or environmental degradation.
The Commission can start right away to ensure that future legislative proposals, such as the personal pensions proposal (PEPP) and alternative investment funds managers directive (AIMFD) integrate environmental, social and governance issues – including a definition for these issues. The momentum is great for bold commitments of the Commission on sustainable finance, with the FSB Task Force on Climate-related Financial Disclosure, the EU High Level Expert Group on sustainable finance and several financial places in Europe launching green finance initiatives.