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The EU and Sustainable Finance
What is Sustainable Finance?
Sustainable finance involves integrating environmental, social, and governance (ESG) factors into financial decision-making processes. The objective is to foster long-term investments that contribute to sustainable economic activities and projects.
In the EU, sustainable finance supports economic growth while reducing environmental pressures, in alignment with the European Green Deal's climate and environmental objectives. It also promotes transparency regarding ESG risks and their mitigation through proper governance.
Importance of Sustainable Finance
Sustainable finance is critical for achieving the EU's climate and sustainability goals, particularly those outlined in the European Green Deal. By channeling private investment into the transition to a climate-neutral and resource-efficient economy, sustainable finance complements public funding and supports a resilient economy. It is also vital for a sustainable recovery from the COVID-19 pandemic.
What is Transition Finance?
Transition finance refers to funding activities that are moving toward sustainability but are not yet fully green. This includes financing projects aimed at reducing greenhouse gas emissions or minimizing environmental impact where green technologies are not yet available. Transition finance is essential for achieving significant environmental targets, such as reducing greenhouse gas emissions by 55% by 2030. The EU provides tools to support both companies with high sustainability standards and those with clear targets but starting from different points.
EU Legislation
On 5 February 2024, the Council and European Parliament reached a provisional agreement on a Proposal for a Regulation on Environmental, Social and Governance (ESG) rating activities, which aims to boost investor confidence in sustainable products.
The provisional political agreement is subject to approval by the Council and the Parliament before going through the formal adoption procedure. The Regulation will start applying 18 months after its entry into force.
Background Information: Commission Expert Groups on Sustainable Finance
These expert groups play a pivotal role in shaping the EU’s sustainable finance policies and ensuring their effective implementation.
Sustainable finance involves integrating environmental, social, and governance (ESG) factors into financial decision-making processes. The objective is to foster long-term investments that contribute to sustainable economic activities and projects.
- Environmental considerations: Focus on climate change mitigation and adaptation, preservation of biodiversity, pollution prevention, and the circular economy.
- Social considerations: Address issues like inequality, inclusiveness, labor relations, investment in people and communities, and human rights.
- Governance: Ensures that public and private institutions adopt appropriate management structures, employee relations, and executive remuneration to integrate social and environmental considerations into decision-making.
In the EU, sustainable finance supports economic growth while reducing environmental pressures, in alignment with the European Green Deal's climate and environmental objectives. It also promotes transparency regarding ESG risks and their mitigation through proper governance.
Importance of Sustainable Finance
Sustainable finance is critical for achieving the EU's climate and sustainability goals, particularly those outlined in the European Green Deal. By channeling private investment into the transition to a climate-neutral and resource-efficient economy, sustainable finance complements public funding and supports a resilient economy. It is also vital for a sustainable recovery from the COVID-19 pandemic.
What is Transition Finance?
Transition finance refers to funding activities that are moving toward sustainability but are not yet fully green. This includes financing projects aimed at reducing greenhouse gas emissions or minimizing environmental impact where green technologies are not yet available. Transition finance is essential for achieving significant environmental targets, such as reducing greenhouse gas emissions by 55% by 2030. The EU provides tools to support both companies with high sustainability standards and those with clear targets but starting from different points.
EU Legislation
On 5 February 2024, the Council and European Parliament reached a provisional agreement on a Proposal for a Regulation on Environmental, Social and Governance (ESG) rating activities, which aims to boost investor confidence in sustainable products.
The provisional political agreement is subject to approval by the Council and the Parliament before going through the formal adoption procedure. The Regulation will start applying 18 months after its entry into force.
Background Information: Commission Expert Groups on Sustainable Finance
- Platform on sustainable finance: Advisory body following the Commission’s rules for expert groups.
- Member States expert group on sustainable finance: Further information available on the European Commission Register.
- Technical expert group on sustainable finance (TEG): Established to assist in the development of sustainable finance initiatives.
- High-level expert group on sustainable finance: Formed in December 2016 to guide the Commission's sustainable finance efforts.
These expert groups play a pivotal role in shaping the EU’s sustainable finance policies and ensuring their effective implementation.
