Reactions to EC Sustainable Finance Action Plan

Stockholm (NordSIP) – The European Commission’s action plan for a financial system that supports the EU’s climate and sustainable development agenda by involving institutional investors and portfolio managers has met with a range of responses, from support to caution to downright criticism.

Among other things, the Commission is entreating insurance and investment firms to advise clients on the basis of their sustainability policies. The commission is also envisaging the creation of green EU-wide labels and the requirements of additional transparency in corporate reporting, based on recommendations made by the High Level Expert Group (HLEG) on sustainable finance.

Promotion

“Global investments hold the key to fighting climate change, with trillions already invested in solutions such as renewables and energy efficiency. The Paris Agreement is a massive investment opportunity. How can we unlock it? [The] action plan will help Europe’s financial sector position itself as a leading global destination for investments in green technologies,” said EU Commissioner for Climate Action and Energy Miguel Arias Cañete upon release of the plan.

Roughly an additional €180 billion in additional investments annually will be required to achieve the sustainability targets and the 40 per cent cut in greenhouse gas emissions agreed in Paris in 2015.

“ESG integration and supportive policy environments must go hand in hand,” director of policy and research at the Principles for Responsible Investment (UN PRI) Nathan Fabian said in an emailed statement to Pensions & Investments. “It is time for a comprehensive and far-sighted response from policy makes and that is what the commission appears to be delivering.”

“The EU’s goal of transitioning to a sustainable economy is important and private equity is well-positioned to support it,” said Michael Collins, CEO of Invest Europe, which represents Europe’s private equity, venture capital and infrastructure sectors, IPE also reported. “In order to create a truly sustainable finance landscape, the commission’s plan needs to reflect the industry’s diversity and take a pragmatic approach.”

Others, such as the European Fund and Asset Management Association (EFAMA) criticised the action plan as a “tick the box” exercise, according to Reuters. “Any mandatory sustainability requirement, especially regarding investments, would turn environmental, social and [corporate] governance into a ‘tick the box’ compliance exercise,” the Association said, underlining its view that legislation like that proposed by the EU is not necessary because sustainable investment should be driven by asset owners, and not by EU fiat.

Eleni Choidas, Senior EU Affairs Officer at ShareAction, worries that despite the welcome measures in the Action Plan, Europe is in danger of developing a two-track system to sustainable finance, in which the ‘green’ aspect is moving much faster than the ‘social’ component. “It is highly unlikely that the uncertainties and risks of climate change can be navigated by communities that are not resilient, and whose rights are not guaranteed by the rule of law,” she writes on euractiv.com.

Meanwhile, “[w]hat we need is bold initiatives tackling obstacles in tax and insolvency law and measures that facilitate capital market financing by smaller companies,” said European Parliament European People’s Party member Markus Ferber, who voices concern about the EU’s capital markets project to provide financing for businesses as Britain, its largest market, heads for the exit. “Sustainable finance is only a diversion from the fact that one of the EC’s flagship projects is about to tank,” he said. The EP will vote on the action plan proposals.

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