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HLEG releases final recommendations

Written by Sara Giordano

The European Commission High-level Expert Group (HLEG) on Sustainable Finance has launched its final report (IPE, 30 Jan) (Euractiv, BusinessGreen, Reuters, Environmental Finance, 31 Jan): It sets out recommendations for consideration by the European Commission to help develop an overarching and comprehensive EU roadmap on sustainable finance and identify steps that financial institutions and supervisors should take to protect the financial system from sustainability risks. The report (in pdf here and press release here) states that reforms on climate risk disclosure rules are needed, regionally and globally. This will help clarify the time horizon associated with material risk factors and foster climate scenario analysis in key sectors exposed to the energy transition risks. The HLEG recommends that the EU implements the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations at EU level, allowing for experimentation time and building on the experience of member states, such as France’s Article 173. In parallel, it says the EU should explore how to align the Non-Financial Reporting Directive (NFRD) with the TCFD guidelines more closely. “We are now moving towards a low-carbon society, where renewable energy and smart technologies improve our quality of life, spurring job creation and growth, without damaging our planet. Finance has a big role to play in funding a sustainable future. I welcome the outstanding work of the HLEG which is excellent input for our upcoming strategy", said Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union.

Similarly, the Expert Group recommends the creation of an EU sustainability taxonomy that will provide a shared EU classification of sustainable activities that will enhance market efficiency and help to channel capital flows towards assets that contribute to sustainable development. The recommendations detail also on investors duties and encourage a greater focus on sustainability issues over the long term and clients' preferences. Several other areas are covered, including green bond standards, sustainable infrastructure, benchmarks, governance, Credit Ratings Agencies and more.

Meanwhile, in New York seven partner organisations, including Ceres, IIGCC, CDP, and PRI, have launched aninvestor agenda to accelerate and scale up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement. Investors, consistent with their fiduciary duties to their clients and beneficiaries, are encouraged to act in four areas: investment, corporate engagement, investor disclosure, policy advocacy.

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