EC reveal plan to clean-up economy

EUROPE: The European Commission (EC) has issued a strategy it hopes will support additional investment it estimates is needed to meet the EU's commitments under the Paris Agreement, including a 40% reduction in CO2 emissions by 2030.

The EC's plan calls for a classification system to clarify what constitutes a sustainable investment
The EC's plan calls for a classification system to clarify what constitutes a sustainable investment

The EU executive's new plan calls for a unified classification system to clarify what constitutes a sustainable investment.

This would underpin a system of EU labels that would make it easy for investors to identify 'green' financial products.

As well as requiring asset managers to take questions of sustainability into account, insurance and investment firms would be required to advise clients on the basis of their preferences for environmentally friendly options.

The EC hopes the plan will spur the additional €180 billion a year needed to reach 2030 targets.

"The Commission will explore the feasibility of recalibrating capital requirements for banks (the so-called green supporting factor) for sustainable investments," it said in a statement.

The EU executive also said it would propose measures to enhance transparency in corporate reporting.

The plans to increase the visibility of 'green' products could be a boon to the renewable energy sector, the trade association WindEurope said.

"Investors will know what they are investing in. Investing in conventional power assets will also become more expensive due to the additional climate risk," the body's CEO Giles Dickson said.

The environmental group WWF also welcomed the "bold" initiative. It recognised the potential to channel investment into sustainable sectors rather than fossil fuels, but cautioned it was insufficient in light of the EU's Paris commitments.

"The Commission should have gone further to ensure mainstream benchmarks - like the FTSE 100 - and retail funds have to disclose their climate impacts," said Sébastien Godinot, an economist at WWF's EU office in Brussels.

Commission vice president Frans Timmermans said the plan would lead to job creation as well as reducing negative environmental impacts.

"Our proposals will allow investors and individual citizens to make a positive choice so that their money is used more responsibly and supports sustainability," he said.

Legislation to be tabled in May includes proposals to clarify the duties of asset managers and institutional investors, and amendments to the EU's main financial market regulations to "enhance consideration of sustainability", as well as a regulation setting out the principles of a new 'taxonomy' for green financial products.

According to a road map, a system of "eco-labelling" for financial products should be given in further detail by Q3 2019.

First published on Ends Europe

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