European Commission report on Sustainable Finance affirms its commitment to climate action

The European Commission’s High-Level Expert Group (HLEG) on Sustainable Finance has identified ways that the finance sector can re-connect with the real economy to support the transition to a more resource-efficient and more circular economy. 

The final report by its High-Level Expert Group on Sustainable Finance (HLEG), published today, sets out strategic recommendations for a financial system that supports sustainable investments including:

• a classification system, or ‘taxonomy’, to provide market clarity on what is ‘sustainable’

• clarifying the duties of investors’ when it comes to achieving a more sustainable financial system

• improving disclosure by financial institutions and companies on how sustainability is factored into their decision-making

• an EU-wide label for green investment funds

• making sustainability part of the mandates of the European Supervisory Authorities (ESAs)

• a European standard for green bonds.

The group argues that reorienting investment flows into long-term, sustainable projects will also improve the stability of the financial system.

Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said: “The signature of the Paris Agreement in 2015 marked a milestone for the world and for the global economy. We are now moving towards a low-carbon society, where renewable energy and smart technologies improve our quality of life, spurring job creation and growth, without damaging our planet. Finance has a big role to play in funding a sustainable future.”

Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness said: “The EU is already at the forefront of investing in resource efficiency and social infrastructure, not least through the European Fund for Strategic Investments and its reinforced focus on climate action. At the same time, creating an enabling framework for private investors is crucial to achieving the transition to a cleaner, more resource-efficient, circular economy.”

Climate-KIC is fostering innovation in finance and metrics that helps shift flows from fossil-fuel based assets to greener assets, by mainstreaming climate into financial decision making as well as ensuring climate risk information is widely accessible. 

Riyong Kim Bakkegaard, Interim Director, Decision Metrics and Finance at Climate KIC commented on the report:

“Finance is key to meeting the challenges of climate change. Historically, the costs of climate change have been external to the modern-day financial system, and therefore, it’s not that there’s a lack of finance but it’s that more financial flows need to be directed to pro-climate assets.

Climate technologies and policies are key to reducing emissions and adapting to climate change. Channelling finance to pay for these emissions reductions and adaptation strategies are the next challenge. The HLEG’s final report provides us with guidance on what the sector can do.”

As a pan-European network, Climate-KIC is in a position to help Europe achieve the recommendations outlined in the report.

This year, Climate-KIC will embark on an ambitious programme of climate finance and metrics work, together with its partners to help trigger a shift towards climate action.

The European Commission’s report will form the basis of the Commission’s forthcoming comprehensive Action Plan on sustainable finance.

Both the findings of the report and the Commission’s Action Plan will be discussed at a high-level conference on 22 March 2018 in Brussels.

See the report in full here.