EU Commission action plan on sustainable finance

In March 2018, the European Commission adopted an action plan on sustainable finance as part of a strategy to integrate environmental, social and governance considerations into its financial policy framework and mobilise finance for sustainable growth. In May 2018, the Commission released the first legislative package under the action plan. The four proposals included in the package are: (1) a unified EU classification system (‘taxonomy’), (2) investors’ duties and disclosures, (3) low-carbon benchmarks, (4) better advice to clients on sustainability. In July 2018, the Commission also established a technical expert group on sustainable finance (TEG) to inform work on the action plan, notably in the development of a classification system for sustainable economic activities, an EU green bond standard, methodologies for low-carbon indices, and metrics for climate-related disclosure.

More information on the work of the TEG can be found here. For an open letter calling on the EU Commission to include human rights expertise in the technical expert group on sustainable finance, to which the Business & Human Rights Resource Centre was also a signatory, see here.

The European Green Deal has announced a Renewed Sustainable Finance Strategy, which aims to ensure that financial systems support the transition towards sustainability in a context of recovery. The renewed strategy will build on the action plan and the work of the TEG. To inform the development of the renewed strategy, the Commission launched a consultation (deadline: 15 July).

The TEG's mandate ends on 30 September 2020. Following the adoption of the Taxonomy Regulation in June 2020, the Commission launched a call for applications for members of the 'Platform on sustainable finance', as set out by the taxonomy (deadline: 16 July). The platform will be an advisory body, comprising a group of experts who will advise the Commission on the technical screening criteria for the EU Taxonomy, among other, as well as on sustainable finance more broadly.

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7 January 2019

EU Commission publishes draft rules for finance companies to strengthen sustainability dimension of insurance & investment counselling

Author: European Commission

'Commission publishes draft rules to ensure investment firms and insurance distributors consider sustainability topics when advising clients', 4 Jan 2019

The Commission has today published draft rules on how investment firms and insurance distributors should take sustainability issues into account when providing advice to their clients. Today's announcement forms part of the Commission's Action Plan on Financing Sustainable Growth first put forward in May 2018, and would amend delegated acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive.

The new draft rules will help integrate Environmental, Social and Governance (ESG) considerations and preferences into investment advice and portfolio management, and into the distribution of insurance-based investment products. [...]

The Sustainable Finance Action Plan is part of the broader Capital Markets Union's (CMU) efforts to connect finance with the specific needs of the European economy to the benefit of the planet and our society and is one of the key steps towards implementing the historic Paris Agreement and the EU's agenda for sustainable development.

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7 December 2018

Overview of outreach plans of the Technical Expert Group on Sustainable Finance

Author: Technical Expert Group on Sustainable Finance

The TEG has been asked to assist the Commission in the development of:

  1. technical screening criteria for environmentally sustainable economic activities under the EU taxonomy;

  2. an EU Green Bond Standard;

  3. minimum standards for the methodology of "low carbon" and "positive carbon impact" indices, and mimimum disclosure requirements on ESG integration in the methodology of benchmarks and

  4. metrics allowing improving disclosure on climate-related information.

The Commission and the TEG aim to foster a transparent and meaningful outreach process as well as communication with experts, other relevant stakeholders, and the media. This document provides an overview of current outreach plans. The document will be updated regularly to include additional dates and details once they are known.

Each of the four sub-groups of the TEG has been asked to identify areas where additional expertise and technical input is needed for the successful conclusion of their tasks. The TEG has also been encouraged to ask for feedback on interim deliverables as much as possible.

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7 December 2018

Technical Expert Group inviting feedback & to host expert workshops on climate mitigation activities & usability of taxonomy

Author: European Commission

The action plan requests the TEG [technical expert group on sustainable finance] to publish a report based on a broad consultation of all relevant stakeholders.

The group is now inviting feedback on the first proposed activities that contribute substantially to climate change mitigation and on the usability of this first list of activities. The group has also identified areas where additional technical expertise is needed. The Commission will therefore host several workshops with the purpose of gathering this expertise...

Technical experts and stakeholders can provide feedback on selected economic activities and the Technical expert group’s proposed criteria for the first sub-set of economic activities expected to make a substantial contribution to climate mitigation. These are called the 1st round climate mitigation activities...

Future users of the taxonomy can provide feedback on the usability and fitness for purpose of the taxonomy in practice...

The deadline for providing feedback is 22 February 2019 cob.

Technical experts are invited to register their interest for workshops to provide technical input to the following activities:

  • The development of new criteria for further economic activities that have the potential to make a substantial contribution to climate change mitigation objectives. These are called the 2nd round climate change mitigation activities.
  • The development of new criteria for activities expected to make a substantial contribution to climate change adaptation objectives of the European Union. These are called climate change adaptation activities.
  • The development of new criteria to assess “do no significant harm” across all environmental objectives

The registration of interest for workshops is now closed after the deadline was extended to 9 January 2019. 

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24 May 2018

Commission legislative proposals on sustainable finance

Author: European Commission

In May 2018 the Commission presented a package of measures as a follow-up to its action plan on financing sustainable growth. The package includes 3 proposals aimed at:

  • establishing a unified EU classification system of sustainable economic activities ('taxonomy')
  • improving disclosure requirements on how institutional investors integrate environmental, social and governance (ESG) factors in their risk processes
  • creating a new category of benchmarks which will help investors compare the carbon footprint of their investments...

Proposal for a regulation on the establishment of a framework to facilitate sustainable investment

Proposal for a regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341

Proposal for a regulation amending Regulation (EU) 2016/1011 on low carbon benchmarks and positive carbon impact benchmarks

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24 May 2018

Principles for Responsible Investment welcomes legislative proposals on financing sustainable growth

Author: Principles for Responsible Investment

“The PRI warmly welcomes these proposals,” said Fiona Reynolds, CEO of the PRI. “The announcement signals opportunities for investment managers to develop new products for green assets as the world looks to transition from a high carbon to a low-carbon economy. The investor duties and disclosures proposal aligns with the PRI’s recommendations on fiduciary duty over many years and with the practices of PRI signatories. The taxonomy and low-carbon benchmark proposals will add essential tools to our market infrastructure in support of a sustainable financial system and capital flows to sustainable growth. The proposal on advice and disclosure to clients has the potential to put sustainability considerations at the heart dialogue with the clients and beneficiaries we all serve.”

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24 May 2018

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

Author: European Commission

The Commission is today delivering the first concrete actions to enable the EU financial sector to lead the way to a greener and cleaner economy.

[The] proposals confirm Europe's commitment to be the global leader in fighting climate change and implement the Paris Agreement. The involvement of the financial sector will greatly boost efforts to reduce our environmental footprint while enhancing the sustainability and competitiveness of the EU economy.

Following up on the first ever EU Action Plan on Sustainable Finance, the proposals will allow the financial sector to throw its full weight behind the fight against climate change...

More investments will be channelled into sustainable activities thanks to new rules that define the criteria to determine whether an economic activity is environmentally-sustainable. This harmonised EU-wide classification system – or ‘taxonomy' - will particularly help investors who often do not have enough information about what is green and what is not. All financial entities that manage investments on behalf of their clients or beneficiaries will now have to inform them about how their activities are impacting the planet or their local environment. In so doing, these rules will give more choice to investors who wish to invest in the future of the planet while earning a return.

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22 March 2018

Open letter calls on EU Commission to include human rights expertise in technical expert group on sustainable finance; BHRRC among signatories

Author: Members of the European Parliament, Civil society organisations, Independent experts, Trade unions

We, the undersigned Members of the European Parliament, civil society organisations, trade unions and independent experts, welcome the Commission’s ambitious Action Plan on Financing Sustainable Growth (Action Plan)...

We commend the Commission’s swift action in opening a call for applications(call) for the formation of a technical expert group on sustainable finance... 

Nonetheless, we regret that the mandate of the group, as described in the call, is insufficient in ensuring the ambitions of the Commission's Action Plan are met...

It is crucial that the Commission include human rights expertise in the technical expert group from the outset, and ensure that a human rights-based approach is adopted in the development and classification of all activities meant to contribute to climate mitigation and adaptation, as well as in the certification of projects and assets linked to green bonds...

The protection of human rights and the protection of the environment are interlinked and inseparable - this fact should be reflected in all policy instruments to be developed and deployed as part of the Action Plan...

The European Union should [...] ensure that the protection of human rights be a key component of all aspects of the proposed taxonomy. 

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