A greener financial system and a greener future

We have set our destination in Europe: we want to be climate neutral by 2050. 

Setting ambitious targets is one thing. Getting there is quite another. 

This week’s measures on sustainable finance provide action.  

The role of the financial system is crucial.

We need an enormous amount of investment to achieve our goals. Public money alone will not be enough – we need to harness private investment. 

There is a growing appetite for green finance options. Europe’s investors are choosing greener stocks and bonds. They want more transparency on how companies are addressing green issues.

It is no easy task – our entire economy will need to be transformed to meet our climate and environmental goals. 

The EU Taxonomy 

The EU Taxonomy provides a clear, credible guide for companies and investors about what activities are truly green. 

This is what the market has been calling for: clarity on what is green. 

We want to help investors and companies make decisions based on a credible, science-based assessment of what activities are green. 

Yesterday we published a Delegated Act with criteria for economic activities that make a substantial contribution to the EU’s climate goals.

It covers activities in sectors responsible for nearly 80% of direct greenhouse gas emissions in Europe, including manufacturing, energy, transport, buildings, insurance and even the arts. 

The Taxonomy is a living document that will evolve over time in light of science and policy, expanding to include more new sectors and activities. 

The Corporate Sustainability Reporting Directive 

Our focus in the past for companies has been on financial information. But we need better, clearer information on sustainability. We want companies to report on how climate risks affect their business – and in turn, how their activities affect people and the environment. 

The Corporate Sustainability Reporting Directive proposal means that companies will report relevant, comparable and reliable sustainability information. We want to put sustainability reporting on an equal footing with financial reporting. 

The Directive will extend existing EU sustainability reporting requirements to all large and listed companies – so nearly 50,000 companies in Europe will have to report sustainability information. 

The market wants clarity. At the moment, companies can use a number of different sustainability reporting standards. This means that the reporting of sustainability information is fragmented and unspecific. 

The Directive will provide this clarity. By introducing a single standard for the reporting of sustainability information, we are putting sustainability reporting on equal footing with financial reporting. 

We are asking companies to take into account the implications that their operations have on the wider climate.

Sustainability Preferences 

The third and final part of the this week’s measures is a series of delegated acts.

There are new rules so that clients’ green preferences are considered when they get investment and insurance advice. 

We have amendments on fiduciary duties so that financial entities take into account climate and environmental risks. 

And we’re clarifying the rules on investment and insurance products so that those designing financial products and financial advisers include sustainability factors.

All of these will increase the demand for financial products with sustainability at their core and reduce greenwashing.

The European Commission is serious about its commitment to the fight against climate change. We are taking significant steps towards building a financial system that will help us to meet our Green Deal goals. 

Europe is leading the way globally on redirecting investments towards meeting the Paris Agreement. We are making the EU economy greener, step by step, as we look towards the recovery. 

Everyone needs to play their part – including business and finance.

Time is short and action is needed now.