Today the European Commission released the first legislative package under the Action Plan for Financing Sustainable Growth.

There are four proposals:

  • A unified EU classification system (‘taxonomy’)
  • Investors’ duties and disclosures
  • Low-carbon benchmarks
  • Better to advice to clients on sustainability

The European Parliament and Council will next review and agree on the proposals. The enabling legislation is scheduled to be adopted from late 2019, with several elements entering into force six months later. Some measures such as the taxonomy will take until 2022 to resolve and the investment advice proposals will first go to public consultation.

“The announcement signals opportunities for investment managers to develop new products for green assets as the world looks to transition from a high carbon to a low-carbon economy.”

Fiona Reynolds, CEO, Principles for Responsible Investment

“The PRI warmly welcomes these proposals,” said Fiona Reynolds, CEO of the PRI. “The announcement signals opportunities for investment managers to develop new products for green assets as the world looks to transition from a high carbon to a low-carbon economy. The investor duties and disclosures proposal aligns with the PRI’s recommendations on fiduciary duty over many years and with the practices of PRI signatories. The taxonomy and low-carbon benchmark proposals will add essential tools to our market infrastructure in support of a sustainable financial system and capital flows to sustainable growth. The proposal on advice and disclosure to clients has the potential to put sustainability considerations at the heart dialogue with the clients and beneficiaries we all serve.”

The European Commission has published brief descriptions of the proposals:

A unified EU classification system (‘taxonomy’)

The proposal sets harmonised criteria for determining whether an economic activity is environmentally-sustainable. Step by step, the commission will identify activities which qualify as ‘sustainable’, taking into account existing market practices and initiatives and drawing on the advice of a technical expert group that is currently being set up. This should provide economic actors and investors with clarity on which activities are considered sustainable so they take more informed decisions. It may serve as the basis for the future establishment of standards and labels for sustainable financial products, as announced in the Commission Action Plan on Sustainable Finance.

Investors’ duties and disclosures

The proposed regulation will introduce consistency and clarity on how institutional investors, such as asset managers, insurance companies, pension funds, or investment advisors should integrate environmental, social and governance (ESG) factors in their investment decision-making process. Exact requirements will be further specified through delegated acts, which will be adopted by the commission at a later stage. In addition, those asset managers and institutional investors would have to demonstrate how their investments are aligned with ESG objectives and disclose how they comply with these duties.

Low-carbon benchmarks

The proposed rules will create a new category of benchmarks, comprising the low-carbon benchmark or “decarbonised” version of standard indices and the positive-carbon impact benchmarks. This new market standard should reflect companies’ carbon footprint and give investors greater information on an investment portfolio’s carbon footprint. While the low-carbon benchmark would be based on a standard ‘decarbonising’ benchmark, the positive-carbon impact benchmark would allow an investment portfolio to be better aligned with the Paris Agreement objective of limiting global warming to below 2°C.

Better advice to clients on sustainability

The commission has launched a consultation to assess how best to include ESG considerations into the advice that investment firms and insurance distributors offer to individual clients. The aim is to amend delegated acts under the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive. When assessing if an investment product meets their clients’ needs, firms should also consider the sustainability preferences of each client, according to the proposed rules. This should help a broader range of investors access sustainable investments.


  • For more details on the European Commission’s action plan, see here.
  • For regular updates on the PRI’s policy work, email
  • On 26 June, the PRI will be hosting an event in Brussels on these legislative proposals. For more information, click here

In January 2016, the PRI, UNEP FI and The Generation Foundation launched a three-year project to end the debate on whether fiduciary duty is a legitimate barrier to the integration of environmental, social and governance issues in investment practice and decision-making.

Learn more about that programme here.


Additional resources

The PRI’s Director of Policy and Research explains the EU Action Plan for Financing Sustainable Growth.