The High-Level Expert Group on Sustainable Finance, established by the European Commission in January 2017, published its interim report, Financing a Sustainable European Economy.
The Commission established the group to advise on developing a comprehensive EU strategy on sustainable finance, as part of the European Union’s effort to build a financial system that supports sustainable growth. The report, which includes the group’s first set of recommendations to facilitate green and sustainable investment through reform of EU rules and financial policies, identifies two imperatives:
1. Strengthening financial stability and asset pricing by improving assessment and management of long-term material risks and value creation, including environmental, social and governance (ESG) issues; and
2. Improving financial sector contribution to sustainable and inclusive growth through financing long-term innovation and infrastructure, and accelerating the shift to a low carbon and resource-efficient economy.
The report recommends developing strategies for capital investment in sustainable projects and providing financial and other incentives for developing green products. It suggests changes to processes and participants in the financial system, including:
- focused fiduciary duties for management and investors relating to sustainability risks;
- clear, comprehensive and comparable sustainability disclosures;
- inclusion of ESG factors and long-term sustainability risks and opportunities in corporate; and
- consideration of the roles of banks, insurance companies and pension funds, asset managers and other financial system participants.
The report also includes suggestions for mobilizing capital for a sustainable economy through:
- greater clarity on policy and strategies; use of a sustainability taxonomy;
- development of sustainable product standards and labels;
- creation of an “Infrastructure Europe” organization responsible for developing and structuring infrastructure projects and matching them with investors; and
- greater engagement of society by increasing literacy on sustainable finance issues.
The group plans to release its final report in December 2017 and has requested feedback on the report’s analysis and recommendations. The group requests interested parties to complete an online questionnaire and to provide operational suggestions to deliver a sustainable financial system in the EU. Responses are due Sept. 20, 2017.
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