New EU rules will make investors report on environmental risk

The European Commission has released fresh proposals to ensure the financial sector contributes towards combating climate change.

New rules and guidance have been created to make it easier for investors to understand and act on sustainability and climate risk concerns. The creation of a ‘taxonomy’ will help define and clarify what investments are, and aren’t, green.

The regulations also propose forcing asset managers and institutional investors to disclose how they are factoring in environmental risk into their investment decisions.

“All financial entities that manage investments on behalf of their clients or beneficiaries will now have to inform them about how their activities are impacting the planet or their local environment,” said the Commission in a written statement. This is intended to create more choice for investors “who wish to invest in the future of the planet while earning a return.”

The proposals build on the Commission’s ongoing work to accelerate sustainable finance within Europe. Its recent Action Plan set out an initial strategy on the issue, which aimed to ensure finance benefitted the planet and society.

Valdis Dombrovskis, Vice President for financial affairs said the actions “show that the European Union is committed to ensuring that our investments go in the right direction.”

“They are about harnessing the vast power of capital markets in the fight against climate change and promoting sustainability."

Jyrki Katainen, Vice-President responsible for jobs and investment commented that an estimated €180 billion a year is needed to meet the EU’s 2030 climate targets.

“Today’s proposals will increase transparency of sustainable finance and the investment opportunities it offers, so that investors have reliable information available to enable the transition to a low-carbon, resource-efficient and circular economy."

The rules will next go to the European Parliament and Council for approval before being made law before 2022.

 

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