European Commission publishes summary report on renewed sustainable finance strategy

By Harrison Folland

The European Commission ("EC") has published a summary report of its consultation on the EU sustainable finance strategy.

The feedback received on the strategy was generally positive. Key opportunities highlighted by stakeholders for mainstreaming sustainability into the financial sector included:

• Providing an enabling climate and environmental long term policy framework;
• Utilising the Covid-19 recovery phase for redirection of capital;
• Intensifying international dialogue and cooperation;
• Using innovations and new technologies, including financial system digitalization; and
• Raising awareness and create new skills and knowledge.

The key challenges raised regarding the mainstreaming of sustainability in the financial sector were as follows:

• Non-sustainable short-term profit-seeking practices and greenwashing;
•  Prevention of the social and economic risks related to the transition and the management of stranded assets;
• The availability, comparability, and quality of data on environment, social and governance (ESG);
• Risk of complexity of the overall new regulatory framework;
• The visibility of the pipeline projects to investors; and
• The need to incorporate consideration of biodiversity impacts within sustainable finance activities.

The EC goes on to summarise the responses received as part of the consultation under the thematic areas of "strengthening the foundations for sustainable finance", "increasing opportunities for citizens, financial institutions, and corporates to enhance sustainability" and "reducing and managing climate and environmental risks".

The FCA does not provide its response to the feedback in the report.

The new sustainable finance strategy is expected to be adopted in Q1 2021.