The European Commission announced the adoption of a series of initiatives aimed at promoting a more sustainable financial system and help facilitate the necessary investments to advance the EU’s and global climate goals.

The measures include a new Sustainable Finance Strategy, proposed regulations on a voluntary European Green Bond Standard (EUGBS), and specifications regarding sustainability information to be disclosed by companies under the EU Taxonomy. The proposals highlight transition finance as a key goal of the EU sustainable finance agenda, and recognize the importance of international cooperation in meeting sustainability goals.

Mairead McGuinness, Commissioner in charge of Financial Services, Financial Stability, and Capital Markets Union, said:

“Today’s Strategy sets out our ambitious roadmap on Sustainable Finance for the years ahead. To achieve our climate targets, we need sustained efforts to ensure more money flows towards a sustainable economy. Significant investment is needed to green the economy and create a more inclusive society, so that everyone can play their part. We must step up global cooperation on climate and environmental issues because the EU cannot fight climate change alone – global coordination and action is essential.”

The proposals mark a significant step towards the goals of the European Green Deal, the EU strategy to transform the region into a modern, resource-efficient and competitive economy, through a package of measures ranging from ambitiously cutting greenhouse gas emissions, to investing in cutting-edge research and innovation, to preserving Europe’s natural environment. Achieving these goals will require the mobilization of massive amounts of capital, highlighting the need for a more advanced and mature sustainable finance market.

Actions included under the new Sustainable Finance Strategy include extending the existing sustainable finance toolbox to facilitate access to transition finance, providing tools and incentives to small and medium-sized enterprises (SMEs) and consumers to access transition finance, and increasing the contribution of the financial sector to sustainability. The strategy also promotes the development of international sustainable finance initiatives and standards.

The proposed European Green Bond Standard aims to help facilitate the financing of sustainable investments through the creation of a ‘gold standard’ for how companies and public authorities can use green bonds to raise funds on capital markets, while meeting rigorous sustainability requirements and protecting investors from greenwashing. The EUGBS would require funds raised to be fully allocated to EU Taxonomy-aligned projects, full transparency through detailed reporting, and external reviewers ensuring compliance.

The new EU Taxonomy measures specify the content, methodology and presentation of information to be disclosed by large financial and non-financial companies on the share of their business, investments or lending activities that are aligned with the Taxonomy. The proposals include the consideration of options to extend the Taxonomy framework to recognize transition efforts, and include additional sustainable activities in the EU Taxonomy.

Valdis Dombrovskis, Executive Vice-President of the European Commission for an Economy that Works for People, said:

“Today’s Sustainable Finance Strategy is key to generate private finance to reach our climate targets and tackle other environmental challenges. We also want to create sustainable funding opportunities for small and medium-sized companies. We will work with our international partners to deepen cooperation on sustainable finance, as global challenges call for global action. We also propose a Green Bond Standard to fight greenwashing and clearly recognise those bonds that truly represent a sustainable investment.”

Click here to access the European Commission sustainable finance proposals.