Sustainable finance: Making the financial sector a powerful actor in fighting climate change

25 May 2018

On the 24 May 2018, the European Commission delivered its first concrete actions empowering the financial sector in fighting climate change and implementing the Paris Agreement.

Following up on the first EU Action Plan on Financing Sustainable Growth, the proposals will provide the financial sector with a key impetus in achieving the EU’s goals on climate change. Furthermore it will also establish the condition to create a sustainable and transparent framework for environmentally-sustainable investments.

The proposals introduce the following measures:

  • A unified EU classification system (‘taxonomy’)
    The proposal sets harmonised criteria for determining whether or not an economic activity is environmentally-sustainable, providing economic actors and investors with clarity which activities are considered sustainable so they can take more informed decisions.
  • Investors’ duties and disclosures 
    The proposed Regulation will introduce consistency and clarity on how institutional investors, such as asset managers, insurance companies, pension funds, or investment advisors should integrate environmental, social and governance (ESG) factors in their investment decision-making process.
  • Low-carbon benchmarks
    The proposed rules will create a new category of benchmarks, comprising the low-carbon benchmark or “decarbonised” version of standard indices and the positive-carbon impact benchmarks.
  • Better advice to clients on sustainability
    The Commission has launched a consultation (from 24 May to 21 June 2018) to assess how best to include ESG considerations into the advice that investment firms and insurance distributors offer to individual clients. The aim is to amend Delegated Acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive.

Following market consultation, the Commission intends to incorporate the proposals into the regulatory framework.

For more information on the press release click here