Status of European Regulatory Developments on Sustainable Finance (AFME)

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Following the adoption of the 2015 Paris agreement on climate change and the United Nations 2030 Agenda for Sustainable Development, the European Commission published its “Action Plan: Financing Sustainable Growth” (Action Plan) having three main objectives:

  • Reorient capital flows towards sustainable investment, to achieve sustainable and inclusive growth;
  • Manage financial risks stemming from climate change, environmental degradation and social issues;
  • Foster transparency and long-termism in financial and economic activity.

In May 2018, the Commission adopted a package of measures2 implementing several key actions announced in its Action Plan. The package included proposals aimed at:

Promotion
  • Establishing a unified EU classification system (“taxonomy”) on what can be considered an environmentally sustainable economic activity;
  • Improving disclosure requirements on how institutional investors and asset managers integrate environmental, social and governance (ESG) factors in their risk processes;
  • Creating a new category of benchmarks comprising low-carbon and positive carbon impact benchmarks to provide investors with better information on the carbon footprint of their investments.

The Commission has achieved significant progress on the proposals under the Action Plan, with all three main initiatives currently in the process of being implemented. In particular:

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