Sustainable Finance

October 2019

  • Sustainable finance remains the priority for the years to come
  • Commission launches the International Platform on Sustainable Finance
  • Council agrees its position on taxonomy

Call to Action

Today’s economy needs to undergo a radical transformation to achieve a climate-neutral and sustainable economy. The availability of high-quality data on environmental, social and governance (ESG) matters is the cornerstone to realise such a shift as it is the basis for sustainable decision-making. Although companies are increasingly reporting on ESG matters, relevance, quality and comparability of the reported information needs to improve in order to meet the stakeholder expectationsBetter non-financial information will improve the assessment of ESG risks and opportunities and will eventually lead to sustainable investments.    

As a first step in this direction, Accountancy Europe recommends revising the Non-Financial Reporting Directive (NFRD) to strengthen non-financial reporting requirements:

  • Expand the scope of the NFRD beyond large public listed entities
  • Indicate a minimum set of mandatory reporting criteria
  • Require companies to disclose their non-financial information in the annual management report
  • Introduce minimum reporting criteria for forward-looking disclosures
  • Ensure the reliability of reported information

Read more

New EU Commission delayed

Over the last couple of weeks, the European Parliament held a series of hearings with Commissioner nominees, before making a final decision on the new Commission, led by Ursula von der Leyen. But as MEPs rejected three candidate-commissioners, the new EU Commission is expected to start work with a delay of one month, at least.

Sustainable finance remains the priority for Dombrovskis

At his hearing on 8 October, future Vice-President Valdis Dombrovskis (financial services) highlighted the importance of scaling up the investments to achieve climate-neutral economy. To that end, he will work on developing Sustainable Investment Plan. The EU must swiftly agree on a unified taxonomy, but also the EC needs to expand the taxonomy into other areas. Standards for green bonds and ecolabels will equally play an important role.

He also highlighted the need to strengthen the foundation of green finance by exploring ways to improve corporate disclosure on sustainability – the Non-Financial Reporting Directive will be revised.

His letter to MEPs on the priorities.

European Green Deal – climate-neutrality to be embedded in all EU policies

Future Vice-President Frans Timmermans was entrusted with the supervision of a European Green Deal. To achieve climate-neutrality by 2050, a European Green Deal will play an important role. But to meet the objectives, the EU needs to scale up public investment and direct private capital toward climate action, also incentivise behavioural change. Timmermans will present the new EU Climate Law within the first 100 days to ensure that climate-neutrality objective is embedded in all EU policies.

His letter elaborating on the priorities.

Council outlines EU position for COP25

On 4 October, the Council adopted conclusions on the EU preparations for COP25 taking place in December 2019. The Council expressed a deepening concern regarding the increasing impact of climate change and the importance of stepping up global climate action.

It is stressed that all parties need to contribute to making global finance flows consistent with a pathway towards low carbon emissions and in line with the Paris Agreement. Sustainable finance needs to be promoted in this context. Read more

Council agreed on its position on the taxonomy

On 25 September, the Council agreed its position regarding a unified classification system to identify what economic activity can be considered as environmentally sustainable. The Council did not exclude ‘nuclear’ projects from taxonomy, despite the demands of Germany, Austria and Luxembourg. The Parliament intends to push back against this during the trilogue negotiations – which are ready to start.

The taxonomy should be established by the end of 2021 for its full application by end of 2022.

ESMA is preparing for 2020

ESMA sets out its priorities for the upcoming year – sustainability is amongst key issues to be dealt with. Under sustainable finance, ESMA will develop the technical standards required by the new regulatory framework on the disclosure for sustainable investments. ESMA will also monitor and act upon the developments regarding the taxonomy. Also, ESMA will continue monitoring the developments in sustainability matters; and will continue its supervision and enforcement role in corporate reporting matters.

EIOPA issues its opinion on sustainability within Solvency II framework

Last year, the Commission requested EIOPA to provide its opinion on sustainability within Solvency II, in particular focusing on aspects relating to climate change mitigation. The opinion covers amongst others sustainable finance considerations. EIOPA’s opinion will feed back into the preparation of the Commission’s report on the Solvency II Directive.

Commission launches the International Platform on Sustainable Finance

On 18 October, the Commission together with other countries launched the International Platform on Sustainable Finance (IPSF) during the meeting that took place in Washington D.C. This ultimate objective is to scale up the mobilisation of private capital flows to green investments at a global level, as climate issues must be tackled globally. The platform is suppose to deepen international cooperation and coordination on the approaches and initiatives which are fundamental for private investors to identify and seize environmentally friendly opportunities (e.g. taxonomy, disclosures, standards and labels). IPSF members: Commission, Argentina, Canada, Chile, China, India, Kenya an Morocco. Read joint statementThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.