Around €180 billion of additional investments are needed annually to achieve the EU's energy and climate 2030 targets
Moving towards a low-carbon economy and achieving a carbon neutral Europe by 2050 is a massive investment opportunity that will generate growth and jobs. Through the adoption of an opinion on Financing Sustainable Growth at the 5-6 December plenary session, EU' assembly of cities and regions has put forward a set of recommendations to create the conditions for financial markets to invest sustainably. The EU's assembly of cities and regions proposes a new European indicator, similar to the existing Regional Social Progress Index, to cover and track a range of development related aspects including sustainability.
The European Committee of the Regions (CoR) has reacted to the European Commission's Action Plan: Financing Sustainable Growth, presented last March 2018. Three new legislative proposals have been published: on the establishment of a framework to facilitate sustainable investment, on disclosures relating to sustainable investments and sustainability risks, and on low carbon benchmarks and positive carbon impact benchmarks.
Cities and regions want to tackle insufficient bank capitalisation and financial market stability and welcome the proposed measures to reorient capital flows towards sustainable long-term investment, manage financial risks stemming from climate change, environmental degradation and social issues and foster transparency and long-termism in financial and economic activity.
Tilo Gundlack (DE/PES), Member of the Landtag of Mecklenburg-Western Pomerania and rapporteur of the opinion on Financing Sustainable Growth declared: "The EU financial sector has to play a leading role in sustainable finance. I acknowledge the EU-wide efforts of insurers and banks to expand investment in sustainable economic activities and welcome the support provided by the Commission's action plan. These proposals reduce the fragmentation of the internal market and can help sustainable financial products to grow. However, I call on the Commission to not limit its approach to environmental aspects and to rapidly think about extending the scope of the Regulation to the social aspects of the Sustainable Development Goals."
The CoR welcomes the Commission's intention to come forward with an EU Green Bond in 2019. Local and regional authorities are themselves issuers of sustainable financial products such as green, social and sustainable bonds. The strategy should be to develop common practices for bonds and improve issuers' financial stability through cooperation, members agree.
Echoing the European Parliament's draft report by MEP Paul Tang (S&D/NL), the CoR stresses the need to lay down not only a clear and harmonised definition of 'sustainable investments' but also of 'sustainability risks'.
Cities and regions also reiterate their support to financial transaction tax to foster markets long-termism. The CoR asks the Commission to report rapidly on its actions to comply with the OECD standards on sustainability-oriented management of the financial system.
The EU's assembly of cities and regions suggests a new European indicator, similar to the existing Regional Social Progress Index, that covers and tracks a range of development related aspects including sustainability.
The adoption of the opinion by Tilo Gundlack complements the work of the CoR as member to the SGDs multi-stakeholder platform which advises the European Commission on how to best deliver on the SGDs in the EU. The report by this platform paves the way to the Commission Reflection Paper on Implementing the Sustainable Development Goals at EU level due for publication in January 2019.
The Action Plan on Sustainable Finance adopted by the European Commission in March 2018 has three main objectives:
- Reorient capital flows towards sustainable investment, in order 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 particular, the following actions are planned:
- The establishment of a common language for sustainable financing, ie. a unified EU classification system, to determine what is sustainable and to identify areas in which sustainable investments are likely to produce the strongest impact
- The creation of European labels for so-called "green" financial products on the basis of this European Union classification system
- Clarification of the duties of asset managers and institutional investors in terms of taking sustainability into account in investment processes and enhancing transparency
- The integration of sustainability into prudential requirements.
EC Press Release: Sustainable finance: Commission's Action Plan for a greener and cleaner economy.
Photos of the Plenary Session are available here.
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