Greentervention responded to the hundreds of questions of consultation by the European Commission on sustainable finance. You can download our answers here:
The European Commission held a detailed public consultation on its upcoming Renewed Sustainable Finance Strategy, expected to shape the debate on sustainable finance in Europe for the years to come.
Our five take away are:
- All private and public actors, especially in the financial sector, have to ground their decisions on the new understanding that major disruptions, so called “black swans” or “tipping points” with irreversible catastrophic consequences, will occur with a non-negligible probability if past trends of greenhouse emissions and degradation of biodiversity continue.
- In an uncertain world, it is crucial that actors have the incentive to learn by collecting, assembling and retaining information with the aim to increase and improve our common knowledge. Allocating more funds to sustainable activities require that financial products and architecture are developed with the aim to improve transparency and to strengthen the incentive for creditors to be aware of the use of the funds.
- The need for collective responses is underestimated and the capacity of competitive markets to manage efficiently externalities of the dimension of climate change and deterioration of the biodiversity is still largely overestimated.
- To succeed the sustainable finance agenda needs to be embedded in a broader economic and fiscal agenda taking care of social and environmental justice objectives and of market failures in decisive sectors like building insulation or transport. A reform of the economic governance of the EU, especially of the European Semester coordinating economic policies, should take this into account.
- To apply appropriate policies, for example stricter prudential rules, we desperately need a taxonomy allowing to identify activities harming the environment, especially contributing to climate change and to the deterioration of the biodiversity. Harming the environment adds per se to the risk of an activity, either via a reputational risk or jurisdictional risk (accountability) or via a transition risk (changing regulation, changing behavior of consumers). By contrast, activities contributing to enhance the environment (“green” activities as identified by the European taxonomy) do NOT reduce its prudential risk per se.