The European Commission Action Plan: An assessment of the reform areas for PRI signatories provides an overview of the main reform areas. Action 2 looks at creating standards and labels for green financial products. 

Key points

  • The European Commission will develop standards and labels for sustainable finance products, including green bonds. The EU Ecolabel Regulation could be used to create an EU-wide labelling scheme and the Commission is considering SRI fund labelling.
  • Standards and labels will protect integrity and trust in sustainable finance products, while better enabling investors to access such products, particularly benefitting retail investors.
  • The Commission will explore the use of the EU Ecolabel Regulation when the sustainable finance taxonomy is more developed.
  • The European Commission will commission a technical expert group to report on an EU green bond standard by mid 2019. By that date, green bond prospectuses must include additional information, under the framework of the Prospectus Regulation.

Comment

Standards and labels will help build confidence in sustainable finance products, potentially increasing institutional and retail investor interest in such products.

The green bond market is small but growing. The EU green bond standard will help it mature and further improve the credibility of green bonds.

PRI signatories should engage with the Commission’s plan for standards and labels to ensure these give clients visibility on strong sustainability practices and build trust.

The standards and labels are expected to refer to the sustainability characteristics of the financial products themselves, in relation to the sustainability taxonomy. They are not expected to start with the SDG framework as a categorisation tool for classes of investment, although others may undertake the work to link the financial products to specific SDGs.

Download the full report