Commission puts forward new strategy for Sustainable Finance

On 8 July 2021, the MFSA issued a Circular regarding a number of measures adopted by the European Commission on Sustainable Finance on 6 July 2021. The measures adopted highlight the ever-increasing level of ambition with respect to sustainable finance and include:

1.The new Sustainable Finance Strategy for a more sustainable EU financial system.

This new strategy aims to, inter alia, establish ample initiatives to combat climate change and other environmental issues while increasing investment in the EU’s conversion towards a more sustainable economy and improve the inclusiveness of small and medium-sized enterprises (SMEs). The implementation of the Strategy is set to be reported by the Commission by the end of 2023 and the Commission will continue to be of support to Member States in their efforts on sustainable finance.

2.The proposal of the European Green Bond Standard (EUGBS)

The legislative proposal on EUGBS provides insight on how companies and public authorities can use green bonds to raise funds on capital markets, to finance investments while satisfying rigid sustainability specifications and safeguard investors from greenwashing. All potential issuers, including those situated outside the EU, shall be able to leverage EUGBS provided certain requirements are adhered to. 

3. The adoption of a Delegated Act by the Commission on the information to be disclosed by both financial and non-financial companies regarding the extent of their company’s sustainability in virtue of Article 8 of the EU Taxonomy.

Financial institutions such as large banks, investment firms, asset managers and insurance companies will be obliged to disclose the share of environmentally sustainable economic activities in the total assets they finance or invest in. In addition to the above, Non-Financial companies must disclose the share of their turnover, capital and operational expenditure affiliated with environmentally sustainable economic activities as interpreted in the Taxonomy Regulation and the EU Taxonomy Climate Delegated Act as well as any subsequent delegated acts on other environmental purposes.

The proposals made by the European Commission are a major step towards reaching the targets of the European Green Deal by ensuring an extensive course of action to funding the green transition.  Moreover, Sustainable Finance will help guarantee that investments support a strong economy and a sustainable recovery from the negative impacts of the COVID-19 pandemic.