Sustainable Finance: the EU enters the final stretch

31 March 2023 - Foreword of the week - By : Anuschka HILKE

Elections of the European Parliament are coming up in June 2024 and will be followed by the renewal of the Commission. Hence, there are only a few months left to finalize the implementation of the renewed sustainable finance strategy adopted in 2021. This strategy aims, among other things, to increase the contribution of the financial sector to sustainability. It seems too early to already draw conclusions on how the Commission delivered on its objectives as some key legislative and supervisory processes are still under way. This newsletter focusses on some of these ongoing processes that receive quite some attention in the public debate


The first one is about climate stress tests. In early March, the European Commission launched a new climate stress testing exercise covering the entire European financial system. While it is not the primary focus of such exercises, I4CE has looked into the impact on transition financing. This report published today shows that, to date, while they have had some undeniably interesting co-benefits for banks and supervisors, this impact has been limited. And it is likely to remain so in the future.


What about the obligation for banks to have climate transition plans? After having introduced in the Corporate Sustainability Reporting Directive an obligation to companies, including financial institutions, to publish Climate transition plans, European legislators are negotiating the revision of the Capital Requirements Directive (CRD) and the introduction of a Corporate Sustainability Due Diligence Directive (CSDDD). Two directives that also talk about climate transition plans. Taken together, all these directives can make a difference. But they have to be consistent with each other. This is what you will find out in our latest OpEd by Romain Hubert. 


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To learn more
  • 02/17/2023 Foreword of the week
    Climate transition plans for banks: European legislators on a razor’s edge

    The proposal for mandatory climate transition plans for banks is slowly making its way through the regulatory debate. Proposed by the European Commission and confirmed by the EU Council, this proposal has now also been taken up by the European Parliament. This obligation could be a game-changer for financial risk management and the alignment of financial flows with the transition to a low-carbon economy. It could lead banks to limit their activities in climate-damaging activities, adjust their business models, review their strategies as well as their governance and risk management procedures.

  • 01/18/2023
    The limitations of voluntary climate commitments from private financial actors

    Private finance will not fund the transition without a stronger commitment from public authorities.
    For several years, and particularly since COP 26, considerable time and attention has been dedicated to the subject of voluntary commitments from private financial actors. These commitments, made within the framework of international initiatives, should in principle enable private finance to be mobilized for the transition to a carbon neutral economy.

  • 11/25/2022 Foreword of the week
    Financial regulators must strengten their game

    One year ago the creation of the Glasgow Finance Alliance for Net Zero – GFANZ – was announced. The expectations were as big as the numbers: a coalition gathering 500 financial actors representing 130 trillion dollars. Private financial actors were finally stepping in and mobilizing. But one year later, the coalition raises many doubts. On one side it faces criticism from NGOs, and on the other some US actors are considering leaving the coalition under the pressure of members of Republicans Party.  

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