Sustainable finance: European Commission launches a consultation to revamp its strategy

ABBL Published 24.04.2020

On 8 April, the European Commission published a consultation on sustainable finance in order to gather feedback to prepare a renewed sustainable finance strategy.

In March 2018, the European Commission presented a sustainable finance strategy and subsequently adopted legislative proposals such as on the Taxonomy, Disclosures and Benchmarks. It also started to work on a series of level 2 measures.

In December 2019 the new von der Leyen Commission presented its European Green deal, introducing the idea that the financial system was not transitioning fast enough and that a renewed sustainable finance strategy would be presented in 2020 in order to make substantial progress in that direction.

What is the focus of the Renewed Sustainable finance strategy?

Based on the consultation we can expect that the renewed sustainable finance strategy will build on the previous one and that some of the issues raised in the consultations have been in discussion for the past couple years, in particular the green bond standards or the labels.

The Renewed Sustainable Finance Strategy will focus on three aims:

  • Strengthening the foundations for sustainable investment by creating an enabling framework, with appropriate tools and structures. This includes company reporting and transparency, accounting standards, research and ratings, sustainability standards and labels, including on Green bonds and investor engagement.
  • Increased opportunities to have a positive impact on sustainability for citizens, financial institutions and corporates. This second pillar aims at maximising the impact of the frameworks and tools in order to “finance green”, including mobilising retail investors and reflecting on incentives to invest in sustainable products.
  • Climate and environmental risks will need to be fully managed and integrated into financial institutions and the financial system as a whole, while ensuring social risks are duly taken into account where relevant. Reducing the exposure to climate and environmental risks will further contribute to “greening finance”. For this the European Commission is for instance looking at prudential frameworks, climate-related loss and physical risk data, credit rating agencies.

Next steps:

The European Commission is currently reworking some of its political and legislative priorities due to the impact of the COVID-19 crisis. However, we understand that Sustainable finance will remain high on the agenda of the EU work programme. Indeed, in its consultation document, the European Commission links sustainability issues such as climate risks and biodiversity issues as possible causes of future outbreaks.

Key dates:

  • The Consultation is open until 15 July 2020.
  • The Renewed sustainable finance strategy is expected to be published this autumn.

By Aurélie Cassou

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