European Commission Expert Group on Sustainable Finance Issues Interim Report


On July 13, 2017, the European Commission published the interim report of its high-level expert group (“HLEG“) on sustainable finance. The HLEG was established in October 2016 as one of the initiatives relating to the Commission’s capital markets union (CMU). The HLEG’s aim is to provide recommendations on how to entrench sustainability into the EU’s regulatory and financial policy framework and to utilize more capital flows towards sustainable investment and lending.

The HLEG report sets out initial recommendations on areas where EU policymakers could further align financial practices with sustainable policy objectives. Its recommendations include:

  • Establishing an EU classification of financial products that captures all acceptable definitions of “sustainable.” The HLEG suggests that this could be finalized before the end of 2018 ahead of the review of the Regulation on key information documents for packaged retail and insurance-based products (PRIIPS Regulation) (Regulation 1286/2014).
  • Establishing a single set of principles for financial intermediaries’ fiduciary duties that incorporates environmental, social and governance (ESG) factors. The HLEG suggests that the Commission should use its forthcoming reviews of financial services sectoral legislation to address this issue.
  • Improving the disclosures made by firms and financial institutions on sustainability issues.
  • Developing a sustainability test to ensure that sustainability is embedded across all future EU financial regulations and policies.
  • Using the ongoing review of the European Supervisory Authorities (“ESAs“) (being ESMA, EIOPA and the EBA) to clarify and enhance the ESAs’ roles on ESG issues.

The HLEG also sets out policy areas relating to sustainable finance that it considers require further discussion. These include potential reforms relating to firms’ governance, credit rating agencies’ (CRAs) methodologies, financial reporting, benchmarks and the prudential requirements for banks and insurers.

The HLEG intends to undertake public consultations on its recommendations with “key participants in the investment and lending chain.” It will use feedback received on the initial report in its work in developing further recommendations for inclusion in its final report, which it intends to publish in December 2017.