Finance experts’ recommendations on climate could prove “transformational” for Europe

European financial experts have today published a suite of recommendations for how to ‘green’ EU financial practices. The EU’s High Level Expert Group on Sustainable Finance (HLEG) has worked on the package for several months. It includes suggestions for clear instructions on how financial actors should treat environmental, social and governance (ESG) factors - including climate change.

ClientEarth lawyers have said the proposals are a significant step forward, and could prove transformational – it all depends on if they are taken up in the EU’s forthcoming Sustainable Finance Action Plan.

ClientEarth lawyer Dave Cooke said: “These recommendations could be transformational for Europe’s financial sector. For one, requiring better reporting on climate issues, in line with the standards from the Task Force on Climate-related Financial Disclosure, will really cement a climate-conscious approach across the EU.

“Investors are already under duties to consider risks, including ESG risks, but many investors are still failing to recognise the extent of these duties. The clarifications proposed would make it crystal clear that investors should be thinking beyond the short term, and keeping climate and environmental considerations at the forefront of their minds when making investment decisions. The HLEG recommends that these clearer guidelines on investor duties be carried through a whole package of EU laws – which, again, would make for a comprehensive change in investment practice.”

Dave also highlighted the need for strong oversight, welcoming the HLEG’s recommendations in this respect.

He said: “It’s good to see recommendations on regulatory oversight of ESG matters – whether that be through existing supervisory authorities or a new observatory. Good oversight with a clear climate brief will be key to making sure all parts of the financial market are moving in the right direction.

“These recommendations are ambitious but sorely needed – investors and companies are currently claiming a lack of clarity on their duties and expectations when it comes to environmental risks. We strongly hope the Commission reflects the HLEG’s ambition in its action plan – it could prompt a considerable shift in Europe’s financial sector, and the role it plays in tackling climate change.”

The Commission is set to publish a proposal for the Sustainable Finance Action plan in early March.