The European Commission's High-Level Expert Group on Sustainable Finance released their interim report on 13 July 2017.
In the aftermath of the financial and sovereign debt crises, sustainable finance could provide the best opportunity for the European Union to reorient its financial system from short-term stabilisation to long-term impact. The EU has been leading on the global sustainability agenda, which seeks to combine economic prosperity with environmental and social sustainability. The EU also recognises that the goal of sustainability must be supported by a financial system that promotes growth in a way that is sustainable over the longer term.
The EU must now develop a clear strategy that unifies this ambition with one of its key achievements in terms of financial policy and regulation, and which also funds the path towards a low-carbon, resource-efficient and environmentally protective economy. To that end, in December 2016, the European Commission established a High-Level Expert Group (HLEG) on sustainable finance. The HLEG’s objective is to help to develop an overarching and comprehensive EU strategy on sustainable finance to integrate sustainability into EU financial policy. It brings together experts with diverse profiles representing different approaches to this complex topic.
While EU reforms following the financial crisis managed to stabilise the financial system, the challenge is now to improve its contribution to sustainable development. The functioning of the financial system thus needs to be refreshed in the dual context of stimulating job creation, investment and prosperity in Europe, as well as making the transition to a sustainable model of development. Responding to the challenge of long-term sustainable development is also a powerful way for financial institutions to reclaim the positive role they can play in society.
This interim report of the HLEG identifies two imperatives for Europe’s financial system. The first is to strengthen financial stability and asset pricing, by improving the assessment and management of long-term material risks and intangible factors of value creation, including those related to environmental, social and governance (ESG) issues. The second is to improve the contribution of the financial sector to sustainable and inclusive growth, notably by financing long-term needs such as innovation and infrastructure, and accelerating the shift to a low carbon and resource-efficient economy.