EC Publishes Action Plan on Sustainable Finance

The EC-adopted action plan on sustainable finance has three main objectives: reorient capital flows toward sustainable investment, to achieve sustainable and inclusive growth; manage financial risks stemming from climate change; environmental degradation, and social issues; and foster transparency and "long-termism" in financial and economic activity. EC has proposed an EU strategy on sustainable finance that outlines a roadmap, including the following actions, covering all relevant actors in the financial system:

• Establishing a common language for sustainable finance—that is, 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 the 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 for banks and insurers. Also, exploring the feasibility of re-calibrating 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 reporting via a proposal to revise the guidelines on non-financial information to further align the guidelines with the recommendations of the FSB Task Force on Climate-Related Financial Disclosures, or TCFD.

Related Links 

• Press Release
• Action Plan on Sustainable Finance
  
• High-Level Conference

Keywords: Europe, EU, Banking, Securities, Insurance, Sustainable Finance, Action Plan, EC