EC Releases Action Plan on Sustainable Finance

On March 8, 2018, the European Commission (“EC“) released an Action Plan on sustainable finance. The goal of the Action Plan is to provide a strategy on sustainable finance for the EU, and in particular to reorient capital toward sustainable investment, manage financial risks stemming from climate change, natural disasters, environmental degradation and social issues; and foster transparency and long-termism in financial and economic activity. The Action Plan builds on the priorities identified in the final report published in 2018 by the EU High-Level Expert Group on Sustainable Finance.

The key actions proposed in the Action Plan are: creating a unified classification system for sustainability, identified as the most important action of the Action Plan; creating standards and labels for green financial projects; clarifying duties of investment managers such as pension funds, insurance companies and asset managers to ensure they consider environmental, social and governance issues in investment decisions; incorporating sustainability in capital requirements for banks and insurance companies; and strengthening issuers’ sustainability disclosure and improving accounting rule-making to ensure accounting rules do not discourage sustainable investment. The Action Plan includes a timetable for all actions to be taken by the second quarter of 2019, and the first identified action is the tabling by the Commission of a legislative proposal in the second quarter of 2018 that will include tools allowing for the establishment of a sustainability classification system.

The European Commission’s press release announcing the publication of the Action Plan is available here and includes links to the full Action Plan, an FAQ document and a summary memo.