Eurosif sent a letter to the European Commission (11/06/2021) concerning the forthcoming Renewed EU Sustainable Finance Strategy. Read the full letter here.
Our core recommendations are:
- Transparency is not enough, the EU Green Deal policies need to convey strong price signals – Sustainable Finance has focused over the past couple of years in making the financial system more transparency. More transparency will not however lead to the needed investments at the scale and speed needed, unless policy/price signals to the real economy are equally powerful. Many sustainable activities become investable at scale only if the negative externalities of their unsustainable alternatives are fully priced in.
- Coherent, Effective and Impactful sustainable finance policies – The sustainability challenges we face across Environmental, Social and Governance issues require rapid impactful policies. Therefore, it is vital to focus on the core principles of better regulation: precisely identify market failures that need correction, identify specific policy tools that are likely to be most effective and conduct ex-post robust evaluations of whether these policies have reached their goal or need to be adjusted. And we need more coherence between measures already adopted under the 2018 Action Plan and new upcoming initiatives.
- From defining ‘Green’ towards the Transition Journey – We need to pivot towards focusing on the transition journey to meet these objectives, by defining a set of robust sectoral transition pathways (as foreseen in the EU Climate Law) and scenarios for the sectors of the economy whose transition is key to whether we will collectively reach the objective of carbon neutrality and then getting overtime companies to report against these.
- Promoting internationally European vision of sustainable finance – The principle of ‘double materiality’ will be necessary to deliver the level of transparency for governments, stakeholders, markets and investors to understand and start addressing and factoring risks, impacts and pricing negative externalities. While we support as much as possible global alignment where possible, global alignment should not be an end in itself nor an impediment to the EU’s ambitions to develop a sustainable finance ecosystem and reporting framework that goes beyond the international minimum common denominator.