On sustainable finance and green transition

In the context of the major risks identified as a result of global warming, the adoption of the Paris Agreement in 2015 is intended to limit the increase in global warming to significantly below 2 degrees Celsius, or even below 1.5 degrees Celsius.

The European Commission launched in 2018 an Action Plan on Financing Sustainable Growth, which contains 10 initiatives:

(1) establishing a clear, detailed and uniform taxonomy at European level for classifying sustainable activities;

(2) creating a Europe-wide standard on green bonds and eco-labels for sustainable financial products;

(3) promoting investment in sustainable projects;

(4) incorporating sustainability into investment advice;

(5) developing sustainability benchmarks;

(6) better inclusion of sustainability in the rating process and in market research;

(7) clarify the obligations of asset managers and institutional investors with regard to sustainability;

   

  (8) introducing a "green supporting factor" in EU prudential rules for banks and insurance companies;

  (9) strengthening sustainability disclosures and accounting rules in non-financial reporting;

  (10) promoting sustainable corporate governance and mitigating short-term capital market approaches.

Sustainable finance plays a key role in meeting the policy objectives of the European Green Deal, launched by the European Commission in 2019, as well as the EU's international climate and sustainability commitments, and aims to improve the financial sector to support both sustainable development in the context of climate change and sustainable recovery from the impact of the COVID-19 pandemic. To this end, environmental, social and governance factors (ESG factors) will be taken into account in the investment decision-making process by financial sector entities, thus aiming to guide longer-term investments in sustainable economic activities and projects.

In June 2021, the European Commission adopted a new Strategy for financing the transition to a sustainable economy, proposing several actions to achieve this goal, such as: extension of the EU taxonomy framework, Ecolabel framework for certain financial products, identification of insurance protection gap for natural catastrophes, integration of ESG risks into credit ratings, amendments to the Solvency II Directive to integrate sustainability risks in the governance of insurance risks, etc.


22/11/2021
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