A high-profile advisory body to the EU – the Sustainable Finance High-Level Expert Group (HLEG) – has called for ‘urgent and transformational’ action to accelerate the transition to a low carbon, sustainable economy.

The HLEG, in which the PRI participates as an international observer, was established in December 2016 and is tasked with advising the European Commission on a strategy to fully integrate sustainability into Europe’s system of financial regulation. The group comprises 20 experts from the finance sector, civil society and academia.

Initial findings

In its interim report, the group has developed early recommendations, including:

  • providing EU-level clarification that fiduciary duty requires investors to consider ESG issues – echoing calls from the PRI and UNEP FI;
  • developing a classification system and labelling for green and sustainable assets and products;
  • new measures to connect public authorities and investors on sustainable infrastructure opportunities.

In a sign of growing EU support for the sustainable finance agenda, the HLEG also recommends several actions which have already gained the support of the European Commission. In the interim review of the Capital Markets Union, the EU’s flagship financial reform programme, the Commission pre-empted the HLEG’s interim report by committing to:

  • Developing a ‘sustainability test’ for all future financial services legislation
  • Integrating sustainability into supervisory processes – in particular, the work of EIOPA, ESMA and the ECB.
  • Further integrating the FSB Taskforce on Climate-Related Disclosure’s recommendations into the EU’s reporting architecture

Emerging policy agenda

The HLEG has also identified areas for further discussion, including developing a sustainable finance ‘observatory’, long-term policy signals, governance of firms and financial institutions, further integration of sustainability into credit ratings, reform of financial reporting, accounting methodologies and ways to involve society in sustainable finance.

Commenting on the report, Nathan Fabian, Director of Policy and Research at the PRI, said: “The interim report is an important step towards an ambitious but achievable action plan to align Europe’s financial system with pressing sustainability challenges.

“Crucially, the report comes at a time of increasing ambition on sustainable finance amongst EU leaders.

“We look forward to continuing to support the work of the group and engaging our European members on the proposals.”

Christian Thimann, Chair of the High-Level Expert Group, commented: “Sustainable finance is about two imperatives. The first is to improve the contribution of finance to sustainable and inclusive economies. The second is to strengthen the financial system itself by better managing environmental, social and governance (ESG) risks.

“The interim report sets out a range of policy proposals to help achieve these aims and deliver on Europe’s vision of a sustainable, inclusive economy. We look forward to a lively discussion with a wide range of stakeholders to inform our final report in December 2017.”

Next steps

The interim report will be open to consultation in summer 2017. A final report will be released by the end of 2017 and the European Commission has committed to responding to the group’s proposals in early 2018.

The PRI will be consulting with signatories across Europe. For more information, please contact [email protected].

A public hearing on the interim report is scheduled for 18 July.