ICMA commentary on the new EC sustainable finance strategy

 

15 July 2021 On 6 July 2021, the European Commission (EC) published its Strategy for Financing the Transition to a Sustainable Economy.

The International Capital Market Association (ICMA) supports the overall ambition and key objectives of the new strategy: (1) financing the transition, (2) inclusiveness, (3) financial sector resilience and contribution to the EU Green Deal target and (4) global ambition. ICMA agrees that the capital markets can help the EU deliver on these key objectives, especially through the growth and further development of sustainable finance that the strategy aims in turn to foster.

ICMA welcomes the strategy’s emphasis on transition that echoes the recommendations of the Transition Finance Report of the Commission’s Platform on Sustainable Finance of which ICMA is a member. We also strongly support the priority given to adopt a delegated act under the EU Taxonomy covering the remaining four environmental goals, i.e. water, biodiversity, pollution prevention and circular economy by Q2-2022.

We are concerned however that other initiatives relating to the Taxonomy focus essentially on widening its scope as a classification tool rather than enabling it as a transition financing resource. We caution that expanding the Taxonomy to defining economic activities that “do not have a significant impact on environmental sustainability” and to those “that significantly harm environmental sustainability” are unlikely to stimulate the supply of transition finance.

We comment on the proposed EU Green Bond Standard summarising the points we have made in a separate publication. We identify a risk of duplication of market initiatives in the strategy’s proposal to launch official labels for sustainability-linked or transition bonds. Conversely, we agree that European labels for sustainable fund products can address the emerging risk of fragmentation in this area in the EU.

We otherwise comment in this paper on other initiatives in the strategy relating to disclosures.

Generally, we set out below key points of attention that may require further consideration in order to effectively achieve the goals envisaged by the strategy.

We also provide in the annex an infographic summary of the new actions under the EU’s strategy highlighting the main areas of focus for ICMA.

Access the full ICMA commentary
ICMA Zurich

T: +41 44 363 4222
Dreikönigstrasse 8
8002 Zurich
ICMA London

T: +44 20 7213 0310
110 Cannon Street
London EC4N 6EU
ICMA Paris

T: +33 1 70 17 64 72
62 rue la Boétie
75008 Paris
ICMA Brussels

T: +32 2 801 13 88
Avenue des Arts 56
1000 Brussels
ICMA Hong Kong

T: +852 2531 6592
Unit 3603, Tower 2
Lippo Centre
89 Queensway, Admiralty
Hong Kong
 
Copyright © 2021 International Capital Market Association.