Today, the High Level Expert Group of the European Commission presents its final report on Sustainable Finance. Irrespective of this, the European Parliament’s own-initiative report on the same subject will be presented tomorrow. It stems from the Parliament’s rapporteur MEP Prof. Molly Scott Cato (Greens/EFA). Both reports aim to make the financial system more resilient, align it with long-term objectives and channel more investment into sustainable projects. The reports propose a uniform classification (taxonomy) of sustainable finance, reliable EU standards for sustainable financial products and a possible EU Label. They also call for more sustainability requirements for fiduciary obligations of investment managers, capital adequacy rules for banks, disclosure rules for firms and the European financial supervisory authorities. Our work in the European Parliament to systematically promote green financial markets and financial products is thus bearing fruit.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“In great agreement, the expert group and the European Parliament address ambitious objectives and concrete demands to the EU Commission. The ball is now in the Commission’s court to take up the recommendations in their legislative proposals. Commission announced such proposals for this year. The financial system needs a better framework in order to promote the green transition of the economy. We must reduce the threat to financial stability posed by high-risk, climate-damaging investments by means of transparency and divestment standards.
Green investments must not be subsidised through unjustified privileges in the capital adequacy rules of banks and insurances. Investments in the future economy are not per se less risky than other investments. Capital adequacy rules serve financial stability and should not be an instrument of business promotion. The expert group and the rapporteur now fortunately agree that capital requirements should continue to be linked to the demonstrated risk of an investment. The addition of sustainability aspects to the mandates of European financial supervisors would significantly improve their ability to act for greater financial stability.
The inclusion of sustainability factors in fiduciary duties would ensure that clients’ ethical concerns are taken into account in their investment decisions. In order to achieve a real change, the sector-specific laws of the banking, insurance and asset management industries should be adapted. In addition, the Parliament’s report demands that disclosure requirements for companies be extended in the future to include environmental, social and governance indicators.
The proposed EU label for sustainable financial products is urgently needed. Small investors cannot inform themselves about the background of their investments, so green financial products must be clearly delineated. The Commission must take up these far-reaching proposals if it is serious about its ambitions regarding sustainable investment.”
Commitments of Finance Commissoner Dombrovskis regarding the promotion of sustainable finance:
Link to COM website of the High Level Expert Group