European Commission Action Plan on Sustainable Finance
FINANCE FOR TOMORROW WELCOMES THE ADOPTION OF THE EUROPEAN COMMISSION’S ACTION PLAN ON SUSTAINABLE FINANCE
This Thursday, March 8, 2018, the European Commission made public the adoption of its action plan for the development of sustainable finance. It aims to promote sustainable finance as a reference framework for the regulation and operation of European financial markets. This deployment is one of the priorities for a capital markets union (CMU) and one of the key elements in the implementation of the Paris Agreement and the EU’s sustainable development agenda. Finance for Tomorrow welcomes the adoption of this concrete and ambitious action plan, which is largely consistent with the framework developed in France.
The objectives of the action plan are to redirect capital flows towards a more sustainable economy, to integrate sustainability into risk management, and to promote transparency and sustainable investment.
The action plan is based on the year-long work of the High-Level European Expert Group (HLEG) on sustainable finance. This group was set up by the Commission in December 2016, is chaired by Christian Thimann, Senior Advisor to the Chairman of AXA and Director of AXA’s Research Fund, and is made up of financial sector professionals from various European countries. Five members of Finance for Tomorrow are part of this group of experts, testifying to the involvement of the Paris financial center in sustainable finance issues. The HLEG published its final recommendations on January 31, 2018, constituting one of the world’s most ambitious projects to help align the financial system with the Paris Agreement’s 2°C trajectory. This project is now one of the priorities of the Commission’s action plan.
The objectives of the action plan are supported by concrete actions:
- Establish a taxonomy of sustainable assets,
- Create standards and labels for green financial products,
- Encourage investment in sustainable infrastructure projects,
- Integrate sustainability into financial advice,
- Develop sustainable financial indices,
- Integrate sustainability into ratings and market research,
- Clarify the obligations of institutional investors and asset managers,
- Integrate sustainability into prudential requirements,
- Enhance transparency on sustainability by improving accounting rules,
- Encourage more sustainable corporate governance and mitigate short-termism in financial markets.
The adoption of the European Commission’s action plan is a major step in the transition to a low-carbon economy and a sustainable financial system. It also validates, in its approach and content, the action taken by Finance for Tomorrow, which is working to make green and sustainable finance a key element in the attractiveness of the Paris marketplace, while seeking to strengthen European and international collaboration on these subjects.
The Paris financial center plays a leading role in the promotion and development of green and sustainable finance:
- France is currently the only country that requires financial players to report on how they take climate risk into account(173 TECV law),
- At Climate Finance Day 2017, the signing of the Charter by French public investors, representing €600bn under management, ruled the integration of ESG criteria into public investment processes,
- France uses a repository (taxonomy) of green activities (climate and environment), adapted from that of the Climate Bond Initiative, enabling the TEEC and SRI labels to effectively value sustainable financial products,
- At Climate Finance Day 2017, Bruno Le Maire, Minister of the Economy and Finance, announced measures to develop green savings products,
- France is a leading player in the green bond market, in terms of issue amounts, and professional structuring and advisory expertise,
- France is ahead of the game in forecasting and planning green financing through its National Low Carbon Strategy (SNBC).
Philippe Zaouati, Chairman of Finance for Tomorrow and CEO of Mirova, comments: ‘The Commission deserves great credit for seeking to put the conclusions of the High-Level European Expert Group (HLEG) on Sustainable Finance into action quickly and effectively. This opportunity to promote sustainable finance and growth must not be missed. The Commission has risen to the challenges of sustainable finance and must be supported in its approach: by the Parliament, by the Member States, by the financial sector and by all stakeholders, in order to make the most of this proposed action plan.’