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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