Sustainable finance is the provision of finance to investments taking into account environmental, social and governance considerations.
Sustainable finance includes a strong green finance component that aims to support economic growth while
- reducing pressures on the environment
- addressing green-house gas emissions and tackling pollution
- minimising waste and improving efficiency in the use of natural resources
It also encompasses increasing awareness of and transparency on
- the risks which may have an impact on the sustainability of the financial system
- the need for financial and corporate actors to mitigate those risks through appropriate governance
Towards an EU strategy on sustainable finance
The European Union is strongly supporting the transition to a low-carbon, more resource-efficient and sustainable economy. The financial sector has a critical role to play in this process. It can
- re-orient investments towards more sustainable technologies and businesses
- finance growth in a sustainable manner over the long-term
- contribute to the creation of a low-carbon, climate resilient and circular economy
The EU has been at the forefront of efforts to build a financial system that supports sustainable growth. In 2015, landmark international agreements were established with the adoption of the UN 2030 Agenda and Sustainable Development Goals and the Paris Climate Agreement. The Paris agreement, in particular, includes the commitment to align financial flows with a pathway towards low-carbon and climate-resilient development.
These commitments and the growing awareness of the urgency to address environmental challenges and sustainability risks call for an effective EU strategy on sustainable finance.
High-Level Expert Group on Sustainable Finance
In its communication on Capital Markets Union – Accelerating reform of September 2016, the European Commission announced that it would establish a High-Level Expert Group on Sustainable Finance to advice on developing a comprehensive EU strategy on sustainable finance.
This High-Level Expert Group (HLEG) was established on 22 December 2016. It comprises 20 senior experts from civil society, the finance sector and academia as well as a limited number of observers from European and international institutions. The task of the HLEG is to provide recommendations to the Commission on how to
- better integrate sustainability considerations in the EU's financial policy framework
- protect the stability of the financial system from risks related to the environment and its stability
- mobilise capital, notably from private resources, to finance sustainable investments and growth
In particular, the HLEG should provide advice on how to
- steer the flow of public and private capital towards sustainable investments
- identify the steps that financial institutions and supervisors should take to protect the stability of the financial system from risks related to the environment
- deploy these policies on a pan-European scale