Special thanks to Valdis Dombrovskis, Executive Vice-President for An Economy that Works for People, European Commission, for joining the expert perspective exchange on investESG.eu.
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– Anete Liepina, Chief Editor
| Many jurisdictions currently work on ESG-related standards aiming at leadership in the field. Meanwhile, entities like the SEC Investor Advisory Committee urge developing jurisdiction-level standards to avoid other countries imposing their ESG-related requirements on US issuers. What impact do you expect from the competing standards, and what will it mean for asset owners in terms of ESG investing efficiency?
The many overlapping international reporting standards confuse companies and investors. The EU is well placed to address this situation – and show leadership in building consensus for a set of standards that can be widely accepted. However, we recognise that we cannot do this alone. Therefore, the best and most widely accepted elements of what exists today will be our starting point. We are also open to working with all organisations that have advanced the cause of sustainability and non-financial reporting. The EU therefore wants to drive convergence in reporting standards, because we understand that markets are global. But we also recognise that reporting standards must meet the specific needs of the EU economy and legislation. We can therefore build on international standards, but international standards by themselves will not be enough.
| Do you expect the pandemic to have a tailwind or rather a headwind effect on the low-carbon transition pace, taking into account the concerns expressed by some market participants in regard to possible funding cuts and the risk of unsustainable recovery measures?
The challenge of climate change has not gone away with the pandemic. While we aim to generate widespread economic growth with the recovery, that growth should be green wherever possible. The European Commission is on track with its plan to raise the EU’s 2030 climate target and deepen cuts in greenhouse gas emissions.
As we heighten our ambition to cut emissions, this will require even more investment. Our longer-term goal of turning Europe climate-neutral by 2050 stays.
However, the cost of fighting the virus is also emptying public coffers. Due to its economic impact, many countries will have more debt, and less fiscal space.
It is clear that public money will not be enough to meet our investment needs. Therefore, the private sector can provide the sheer scale to meet our green ambitions.
That is why we devised the Green Deal Investment Plan: to generate at least €1 trillion over the next decade. As part of this, the European Commission will also present a renewed sustainable finance strategy this year. The public consultation to gather views and ideas was open until July 15.
As regards disclosure rules, in the meantime, another consultation has just ended: on changes to the EU’s non-financial reporting rules. Disclosure of this information – climate and environment data, for example – forms the basis for investor decisions on sustainable investment.
It must improve if we are to encourage uptake of sustainable finance. This is also in line with global initiatives such as the Task Force on Climate-Related Financial Disclosures.
Most people who responded to our public consultation said that the non-financial information reported by companies was insufficient – and on many levels.
Among the respondents, most reporting companies said that they were unsure about what kind of information to report.
We also observed strong support for imposing a requirement on companies to use a common standard for reporting non-financial information, and for a simplified and voluntary standard for small and medium-sized companies.
Finally, a large majority of respondents supported the use of the EU’s new classification system – or taxonomy – as a way to define environmental disclosures required by the non-financial reporting rules. The taxonomy regulation entered into force on July 12. Now, it will be our priority to push ahead actually with the implementation of Taxonomy this year and next.
Taxonomy will be the basis for ecolabels for retail financial products, as well as green mortgages and EU green bond standards.