Afschrift reactie op EU consultatie hernieuwde duurzame financieringsstrategie (bijlage bij 22112,nr.2900) - Hoofdinhoud
Inhoudsopgave
| Officiële titel | Afschrift reactie op EU consultatie hernieuwde duurzame financieringsstrategie (bijlage bij 22112,nr.2900) |
|---|---|
| Documentdatum | 10-07-2020 |
| Publicatiedatum | 28-08-2020 |
| Nummer | 2020D29361 |
| Kenmerk | 22112, nr. 2900 |
| Externe link | origineel bericht |
| Originele document in PDF |  |
Consultation on the renewed sustainable finance strategy
Fields marked with * are mandatory.
Introduction
This consultation is also available in German and French .
On 11 December 2019, the European Commission adopted its Communication on a European Green Deal , which significantly increases the EU’s climate action and environmental policy ambitions.
A number of levers will need to be pulled in order to build this growth strategy, starting with enshrining the climate-neutrality target in law. On 4 March 2020, the European Commission proposed a European Climate Law to turn the political commitment of climate-neutrality by 2050 into a legal obligation. This follows the European Parliament’ s declaration of a climate emergency on 28 November 2019 and the European Council conclusions of 12 December 2019 , endorsing the objective of achieving a climate-neutral EU by 2050.
The ongoing COVID-19 outbreak in particular shows the critical need to strengthen the sustainability and resilience of our societies and the ways in which our economies function. This is necessary to, above all, minimise the risk of similar health emergencies in the future, which are more likely to occur as climate and environmental impacts escalate. In parallel, it will be paramount to ensure the resilience and capacity of our societies and economies to resist and recover from such emergencies. The COVID-19 outbreak underscores some of the subtle links and risks associated with human activity and biodiversity loss. Many of the recent outbreaks (e.g. SARs, MERS, and avian flu) can be linked to the illegal trade in, and consumption of, often endangered wild animal species. Furthermore, experts suggest that degraded habitats coupled with a warming climate may encourage higher risks of disease transmission, as pathogens spread more easily to livestock and humans. Therefore, it is important – now more than ever – to address the multiple and often interacting threats to ecosystems and wildlife to buffer against the risk of future pandemics, as well as preserve and enhance their role as carbon sinks and in climate adaptation.
Financing the European Green Deal and increasing the financial resilience of the economy, companies and citizens
Above all, the transition to a sustainable economy will entail significant investment efforts across all sectors, meaning that financing frameworks, both public and private, must support this overall policy direction: reaching the current 2030 climate and energy targets alone would already require additional investments of approximately €260 billion a year by 2030. And as the EU raises its ambition to cut emissions, the need for investment will be even larger than the current estimate. In addition, significant investments in the upskilling and reskilling of the labour force will be necessary to enable a just transition for all. Hence, the scale of the investment needs goes well beyond the capacity of the public sector. Furthermore, if the climate and biodiversity crises are to be successfully addressed and reversed before potentially dangerous tipping points are reached, much of the investment needs to happen in the next 5-10 years. In this context, a more sustainable financial system should also contribute to mitigate existing and future risks to wildlife habitats and biodiversity in general, as well as support the prevention of pandemics - such as the COVID-19 outbreak.
In this context, the European Green Deal Investment Plan – the Sustainable Europe Investment Plan – announced on 14 January 2020 aims to mobilise public investment and help to unlock private funds through the EU budget and associated instruments, notably through the InvestEU i programme. Combined, the objective is to mobilise at least €1 trillion of sustainability-related investments over the next decade. In addition, for the next financial cycle (2021-2027) the External Investment Plan (EIP) and the European Fund for Sustainable Development Plus (EFSD+) will be available for all partner countries with a new External Action Guarantee of up to €60 billion. It is expected to leverage half a trillion Euros worth of sustainable investments. Lastly, the European Investment Bank (EIB) published on 14 November 2019 its new climate strategy and Energy Lending Policy, which notably sets out that the EIB Group will align all their financing activities with the goals of the Paris Agreement from the end of 2020. This includes, among other measures, a stop to the financing of fossil fuel energy projects from the end of 2021.
However, the financial system as a whole is not yet transitioning fast enough. Substantial progress still needs to be made to ensure that the financial sector genuinely supports businesses on their transition path towards sustainability, as well as further supporting businesses that are already sustainable. It will also mean putting in place the buffers that are necessary to support de-carbonisation pathways across all European Member States, industries that will need greater support, as well as SMEs.
For all of these reasons, the European Green Deal announced a Renewed Sustainable Finance Strategy. The renewed strategy will build on the 10 actions put forward in the European Commission’s initial 2018 Action Plan on Financing Sustainable Growth , which laid down the foundations for channelling private capital towards sustainable investments.
As the EU moves towards climate-neutrality and steps up the fight against environmental degradation, the financial and industrial sectors will have to undergo a large-scale transformation, requiring massive investment . Progress has already been made, but efforts need to be stepped up. Building on the achievements of the Action Plan on Financing Sustainable Growth, the current context requires a more comprehensive and ambitious strategy. The Renewed Sustainable Finance Strategy will predominantly focus on three areas: :
-
1.Strengthening the foundations for sustainable investment by creating an enabling framework, with appropriate tools and structures. Many financial and non-financial companies still focus excessively on shortterm financial performance instead of their long-term development and sustainability-related challenges and opportunities.
-
2.Increased opportunities to have a positive impact on sustainability for citizens, financial institutions and corporates. This second pillar aims at maximising the impact of the frameworks and tools in our arsenal in order to “finance green”.
-
3.Climate and environmental risks will need to be fully managed and integrated into financial institutions and the financial system as a whole, while ensuring social risks are duly taken into account where relevant. Reducing the exposure to climate and environmental risks will further contribute to “greening finance”.
Objectives of this consultation and links with other consultation activities
The aim of this consultation, available for 14 weeks (until 15 July), is to collect the views and opinions of interested parties in order to inform the development of the renewed strategy. All citizens, public authorities, including Member States, and private organisations are invited to contribute. Given the diversity of topics under consultation, stakeholders may choose to provide replies to some questions only. Section I (covering questions 1-5) is addressed to all stakeholders, including citizens, while Section II (covering questions 6-102) requires a certain degree of financial and sustainability-related knowledge and is primarily addressed at experts.
This consultation builds on a number of previous initiatives and reports, as well as complementing other consultation activities of the Commission, in particular:
The final report of the High-Level Expert Group on Sustainable Finance (2018);
The EU Action Plan on Financing Sustainable Growth (2018);
The communication of the Commission on ‘The European Green Deal’ (2019);
The communication of the Commission on ‘The European Green Deal Investment Plan’ (2020);
The reports published by the Technical Expert Group on sustainable finance (TEG) with regard to an EU taxonomy of sustainable activities, an EU Green Bond Standard, methodologies for EU climate benchmarks and disclosures for benchmarks and guidance to improve corporate disclosure of climate-related information.
This consultation also makes references to past, ongoing and future consultations, such as the public consultation and inception impact assessment on the possible revision of the non-financial reporting directive (NFRD) , the inception impact assessment on the review of the Solvency II Directive or the future consultation on investment protection.
Please note: In order to ensure a fair and transparent consultation process only responses received through our online questionnaire will be taken into account and included in the report summarising the responses. Should you have a problem completing this questionnaire or if you require particular assistance, please contact fisma-sfconsultation@ec.europa.eu .
More information:
on the protection of personal data regime for this consultation
About you
-
*Language of my contribution
Bulgarian Croatian Czech Danish Dutch English Estonian Finnish French Gaelic German Greek Hungarian Italian Latvian Lithuanian Maltese Polish Portuguese Romanian Slovak Slovenian Spanish Swedish
-
*I am giving my contribution as
Academic/research EU citizen Public institution authority Business association Environmental organisation Trade union Company/business Non-EU citizen Other organisation Consumer organisation Non-governmental organisation (NGO)
-
*First name
*
Surname
-
*Email (this won't be published)
-
*Scope
International Local National Regional
-
*Organisation name
255 character(s) maximum
Ministerie van Financiën
-
*Organisation size
Micro (1 to 9 employees) Small (10 to 49 employees) Medium (50 to 249 employees) Large (250 or more)
Transparency register number
255 character(s) maximum
Check if your organisation is on the transparency register . It's a voluntary database for organisations seeking to influence EU decisionmaking.
-
-
*Country of origin
Please add your country of origin, or that of your organisation.
Afghanistan Djibouti Libya Saint Martin Åland Islands Dominica Liechtenstein Saint Pierre and Miquelon Albania Dominican Lithuania Saint Vincent Republic and the Grenadines Algeria Ecuador Luxembourg Samoa American Egypt Macau San Marino Samoa Andorra El Salvador Madagascar São Tomé and Príncipe Angola Equatorial Malawi Saudi Arabia Guinea Anguilla Eritrea Malaysia Senegal Antarctica Estonia Maldives Serbia Antigua and Eswatini Mali Seychelles Barbuda Argentina Ethiopia Malta Sierra Leone Armenia Falkland Islands Marshall Singapore Islands Aruba Faroe Islands Martinique Sint Maarten Australia Fiji Mauritania Slovakia Austria Finland Mauritius Slovenia Azerbaijan France Mayotte Solomon Islands Bahamas French Guiana Mexico Somalia Bahrain French Micronesia South Africa Polynesia Bangladesh French Moldova South Georgia Southern and and the South Antarctic Lands Sandwich Islands Barbados Gabon Monaco South Korea Belarus Georgia Mongolia South Sudan Belgium Germany Montenegro Spain Belize Ghana Montserrat Sri Lanka Benin Gibraltar Morocco Sudan Bermuda Greece Mozambique Suriname Bhutan Greenland Myanmar Svalbard and /Burma Jan Mayen Bolivia Grenada Namibia Sweden Bonaire Saint Guadeloupe Nauru Switzerland Eustatius and Saba Bosnia and Guam Nepal Syria Herzegovina Botswana Guatemala Netherlands Taiwan Bouvet Island Guernsey New Caledonia Tajikistan Brazil Guinea New Zealand Tanzania British Indian Guinea-Bissau Nicaragua Thailand Ocean Territory British Virgin Guyana Niger The Gambia Islands Brunei Haiti Nigeria Timor-Leste Bulgaria Heard Island Niue Togo and McDonald Islands Burkina Faso Honduras Norfolk Island Tokelau Burundi Hong Kong Northern Tonga Mariana Islands Cambodia Hungary North Korea Trinidad and Tobago Cameroon Iceland North Tunisia Macedonia Canada India Norway Turkey Cape Verde Indonesia Oman Turkmenistan Cayman Islands Iran Pakistan Turks and Caicos Islands Central African Iraq Palau Tuvalu Republic Chad Ireland Palestine Uganda Chile Isle of Man Panama Ukraine China Israel Papua New United Arab Guinea Emirates Christmas Italy Paraguay United Island Kingdom Clipperton Jamaica Peru United States Cocos (Keeling) Japan Philippines United States Islands Minor Outlying Islands Colombia Jersey Pitcairn Islands Uruguay Comoros Jordan Poland US Virgin Islands Congo Kazakhstan Portugal Uzbekistan Cook Islands Kenya Puerto Rico Vanuatu Costa Rica Kiribati Qatar Vatican City Côte d’Ivoire Kosovo Réunion Venezuela Croatia Kuwait Romania Vietnam Cuba Kyrgyzstan Russia Wallis and Futuna Curaçao Laos Rwanda Western Sahara Cyprus Latvia Saint Yemen Barthélemy Czechia Lebanon Saint Helena Zambia Ascension and Tristan da Cunha Democratic Lesotho Saint Kitts and Zimbabwe Republic of the Nevis Congo Denmark Liberia Saint Lucia
-
*Field of activity or sector (if applicable):
at least 1 choice(s)
Accounting Auditing Banking Credit rating agencies Insurance Pension provision Investment management (e.g. hedge funds, private equity funds, venture capital funds, money market funds, securities) Market infrastructure operation (e.g. CCPs, CSDs, Stock exchanges) Social entrepreneurship Other Not applicable
-
*Please specify your activity field(s) or sector(s):
Public sector
-
*Publication privacy settings
The Commission will publish the responses to this consultation. You can choose whether you would like your details to be made public or to remain anonymous.
Anonymous Only your type of respondent, country of origin and contribution will be published. All other personal details (name, organisation name and size, transparency register number) will not be published. Public Your personal details (name, organisation name and size, transparency register number, country of origin) will be published with your contribution.
I agree with the personal data protection provisions
Section I. Questions addressed to all stakeholders on how the financial sector and the economy can become more sustainable
Question 1. With the increased ambition of the European Green Deal and the urgency with which we need to act to tackle the climate-related and environmental challenges, do you think that:
major additional policy actions are needed to accelerate the systematic sustainability transition of the EU financial sector. incremental additional actions may be needed in targeted areas, but existing actions implemented under the Action Plan on Financing Sustainable Growth are largely sufficient. no further policy action is needed for the time being. Don’t know / no opinion / not relevant
Question 2. Do you know with sufficient confidence if some of your pension, life insurance premium or any other personal savings are invested in sustainable financial assets?
Yes No Don’t know / no opinion / not relevant
Question 3. When looking for investment opportunities, would you like to be systematically offered sustainable investment products as a default option by your financial adviser, provided the product suits your other needs?
Yes No Don’t know / no opinion / not relevant
Question 4. Would you consider it useful if corporates and financial institutions were required to communicate if and explain how their business strategies and targets contribute to reaching the goals of the Paris Agreement?
Yes, corporates Yes, financial institutions Yes, both No Don’t know / no opinion / not relevant
Question 5. One of the objectives of the European Commission’s 2018 Action Plan on Financing Sustainable Growth is to encourage investors to finance sustainable activities and projects.
Do you believe the EU should also take further action to:
1 2 3 4 5 Don't know /
(strongly (disagree) (neutral) (agree) (strongly No disagree) agree) opinion
Encourage investors to engage, including making use of their voting rights, with companies conducting environmentally harmful activities that are not in line with environmental objectives and the EU-wide trajectory for greenhouse gas emission reductions, as part of the European Climate Law, with a view to encouraging these companies to adopt more sustainable business models
Discourage investors from financing environmentally harmful activities that are not in line with environmental objectives and the EU-wide trajectory for greenhouse gas emission reductions, as part of the European Climate Law
Question 5.1 In case you agree or strongly agree with one or both options, what should the EU do to reach this objective?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
In question 6 we describe what the EU should focus on to reach this objective.
Section II. Questions targeted at experts
The following section asks further technical and strategic questions on the future of sustainable finance, for which a certain degree of financial or sustainability-related expertise may be useful. This section is therefore primarily addressed at experts.
Question 6. What do you see as the three main challenges and three main opportunities for mainstreaming sustainability in the financial sector over the coming 10 years?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
There are three principles that we believe should underpin all future policy initiatives of the European
Commission. These principles cover both the challenges and the opportunities we see for mainstreaming
sustainable finance.
-
1.Pricing: the basis of all investments decisions is the risk-return trade-off. Developing sustainable financial
markets will ultimately depend on tipping this balance in favor of green investments.
-
2.Transparency: Standardization and transparency, in all elements of the investment chain, would support
sustainable finance markets. ESG data needs to become more widely available and the data quality needs
to improve. Professional investors need reliable information on underlying assets. Retail investors call for
easily accessible information on investment and saving products. Financial institutions and supervisors
require more information to assess climate-related risks of supervised entities. These needs should be
balanced with the administrative burden for the corporate institutions that have to provide the information.
-
3.Capacity building and developing expertise: while pricing and transparency set the necessary framework
for sustainable finance, it is vital that financial institutions, supervisors and governments build capacity and
develop expertise on sustainable finance. In the Netherlands, the financial sector, supervisors and
government work together to exchange knowledge and set up initiatives in the Platform for Sustainable
Finance. Internationally, we see many good initiatives such as the Coalition of Ministers of Finance, the EU’s
MSEG on Sustainable Finance, the NGFS, and the International Platform on Sustainable Finance.
Question 7. Overall, can you identify specific obstacles in current EU policies and regulations that hinder the development of sustainable finance and the integration and management of climate, environmental and social risks into financial decision-making?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
We are on the verge of a transition to a greener economy. Policies should stimulate financial institutions to
adapt to this transition, for example by taking sustainability related opportunities and risks better into
account. Upcoming reviews of all financial legislation, notably those of Solvency II and CRR2, should be
used to critically evaluate ESG-related risk articles. It is crucial that financial institutions and supervisors
incorporate environmental and climate-related risks in their policies, and therefore essential that our financial
legislation is able to face tomorrow’s risks. In order for finance to be able to adapt, we need to improve
transparency, data availability, data quality and promote standardization.
Question 8. The transition towards a climate neutral economy might have socio-economic impacts, arising either from economic restructuring related to industrial decarbonisation, because of increased climate change-related effects, or a combination thereof. For instance, persons in vulnerable situations or at risk of social exclusion and in need of access to essential services including water, sanitation, energy or transport, may be particularly affected, as well as workers in sectors that are particularly affected by the d e c a r b o n i s a t i o n a g e n d a .
How could the EU ensure that the financial tools developed to increase sustainable investment flows and manage climate and environmental risks have, to the extent possible, no or limited negative socio-economic impacts?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 9. As a corporate or a financial institution, how important is it for you that policy-makers create a predictable and well-communicated policy framework that provides a clear EU-wide trajectory on greenhouse gas emission reductions, based on the climate objectives set out in the European Green Deal, including policy signals on the appropriate pace of phasing out certain assets that are likely to be stranded in the future?
1 - Not important at all 2 - Rather not important 3 - Neutral 4 - Rather important 5 - Very important Don’t know / no opinion / not relevant
Question 9.1 What are, in your view, the mechanisms necessary to be put in place by policy-makers to best give the right signals to you as a corporate or a financial institution?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 10. Should institutional investors and credit institutions be required to estimate and disclose which temperature scenario their portfolios are financing (e.g. 2°C, 3°C, 4°C), in comparison with the goals of the Paris Agreement, and on the basis of a common EU-wide methodology?
Yes, institutional investors Yes, credit institutions Yes, both No Don’t know / no opinion / not relevant
Question 11 Corporates, investors, and financial institutions are becoming increasingly aware of the correlation between biodiversity loss and climate change and the negative impacts of biodiversity loss in particular on corporates who are dependent on ecosystem services, such as in sectors like agriculture, extractives, fisheries, forestry and construction. The importance of biodiversity and ecosystem services is already acknowledged i n t h e E U T a x o n o m y .
However, in light of the growing negative impact of biodiversity loss on companies’ profitability and long-term prospects (see for instance The Nature of Risk - A Framework for Understanding Nature-Related Risk to Business , WWF, 2019), as well as its strong connection with climate change, do you think the EU’s sustainable finance agenda should better reflect growing importance of biodiversity loss?
Yes No Don’t know / no opinion / not relevant
Question 11.1 If yes, please specify potential actions the EU could take:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The Nature of Risk report is part of a broader trend. The Central Bank of the Netherlands and the
Environmental Assessment Agency have published a report on the biodiversity-related physical, transitional,
and reputational risks for the Dutch financial sector (Indebted to nature, June 2020).
Additionally, a group of eight Dutch financial institutions published a paper on the 5th of June about the risks
and opportunities of biodiversity for the financial sector (Biodiversity Opportunities and Risks for the
Financial Sector, June 2020).
The Dutch government is committed to scaling up industry-led initiatives on measuring and reporting on
biodiversity impact and supports the integration of biodiversity in the financial sector on EU and global level.
For biodiversity to be well integrated into sustainable finance policy, existing methodologies and metrics,
currently in development, have to be taken into account. A prime example is the work of the Platform
Biodiversity Accounting Financials (PBAF), set up after the PCAF.
Independent, public, and trustworthy data on biodiversity and the link to economic sectors and local
economic activities has to be made available for companies to be able to report on biodiversity. Existing
open source and publicly available data collected by member states and their environmental agencies
should be used to its fullest.
Question 12. In your opinion, how can the Commission best ensure that the sustainable finance agenda is appropriately governed over the long term at the EU level in order to cover the private and public funding side, measure financial flows towards sustainable investments and gauge the EU’s progress towards its commitments under the European Green Deal and Green Deal Investment Plan?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The governance of the sustainable finance agenda is currently under development. The European
Parliament and the Council mandated a Platform on Sustainable Finance to, among others, monitor and
report regularly to the European Commission on the development of sustainable finance. The Platform will
report on EU and members state trends in capital flows towards sustainable investment and advise the
European Commission on the evaluation and development of sustainable finance policies, including the
issue of policy coherency. We need to assess in future years whether adaptations are needed, for instance
in the area of supervision.
Question 13. In your opinion, which, if any, further actions would you like to see at international, EU, or Member State level to enable the financing of the sustainability transition? Please identify actions aside from the areas for future work identified in the targeted questions below (remainder of Section II), as well as the existing actions implemented as part of the European Commission’s 2018 Action Plan on Financing Sustainable Growth.
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
First, financial institutions must take action to address already materializing biodiversity- and climate-related
risks and make efficient use of relevant and available data to assess these risks. Legislation will require
institutions to monitor climate-risks, so we need to ensure that data on these risks becomes comparable
across financial institutions. There is already a limited number of well-crafted methodologies available that
can quickly scale up to assist institutions with this (e.g. PCAF, BCAF, and PACTA/2°ii). Secondly, the funds
the financial sector manages can play a crucial role in financing the sustainable transition. Financial
institutions should therefore be encouraged to take steps to align their investment and loan portfolios with
the Paris Agreement. The EU should promote the scale-up of sustainable activities to ensure that financial
institutions have sufficient options of decarbonizing their portfolio.
In the remainder of section II the Netherlands identifies some more areas in which we would like to see
further action. For example, we highlight the importance of the development of a general taxonomy and a
level playing field.
-
1.Strengthening the foundations for sustainable finance
In order to enable the scale-up of sustainable investments, it is crucial to have sufficient and reliable information from financial and non-financial companies on their climate, environmental and social risks and impacts. To this end, companies also need to consider long-term horizons. Similarly, investors and companies need access to reliable climate-related and environmental data and information on social risks, in order to make sound business and investment decisions. Labelling tools, among other measures, can provide clarity and confidence to investors and issuers, which contributes to increasing sustainable investments. In this context, the full deployment of innovative digital solutions requires data to be available in open access and in standardised formats.
1.1 Company reporting and transparency
In its Communication on the European Green Deal , the Commission recognised the need to improve the disclosure of non-financial information by corporates and financial institutions. To that end, the Commission committed to reviewing the non-financial reporting directive (NFRD) in 2020, as part of its strategy to strengthen the foundations for sustainable investment. A public consultation is ongoing for that purpose.
The political agreement on the Regulation on establishing a framework to facilitate sustainable investment (‘Taxonomy Regulation’) places complementary reporting requirements on the companies that fall under the scope of the NFRD .
In addition to the production of relevant and comparable data, it may be useful to ensure open and centralised access not only to company reporting under the NFRD, but also to relevant company information on other available ESG metrics and data points (please also see the dedicated section on sustainability research and ratings 1.3). To this end, a common database would ease transparency and comparability, while avoiding duplication of data collection efforts. The Commission is developing a common European data space in order to create a single market for data by connecting existing databases through digital means. Since 2017, Commission Directorate General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) has been assessing the prospects of using Distributed Ledger Technologies (including blockchain) to federate and provide a single point of access to information relevant to investors in European listed companies ( European Financial Transparency Gateway - EFTG ).
Question 14. In your opinion, should the EU take action to support the development of a common, publicly accessible, free-of-cost environmental data space for companies’ ESG information, including data reported under the NFRD and other relevant ESG data?
Yes No Don’t know / no opinion / not relevant
Question 14.1 If yes, please explain how it should be structured and what type of ESG information should feature therein:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
In general, the Netherlands is supportive of exploring proposals to make ESG data better accessible. This
will help stimulate the market for sustainable finance.
However, we have a number of caveats to this proposal. First, a thorough impact assessment should clearly
demonstrate the merits of and support for such a database from the perspective of the intended users.
Second, there should be a critical evaluation of how this database will be funded. Third, these proposals
should not require organizations to disclose additional information according to new reporting standards. The
administrative burden for companies that will be required to submit their data should be minimized. For the
Netherlands it is therefore important to know how a proposal from the European Commission would relate to
existing reporting requirements, for example for the financial statements and the management report.
Furthermore, it should be clear how a proposal relates to the EU requirements for trade registers and
electronic reporting, as defined in the adjusted transparency directive.
In the Netherlands there is standard for how to file digitally in the trade register. Organizations should not
face double reporting requirements and different reporting standards. Therefore, the Netherlands asks the
European Commission to take differences in existing reporting requirements between listed and non-listed
companies into account in the development of its proposal.
Question 15. According to your own understanding and assessment, does your company currently carry out economic activities that could substantially contribute to the environmental objectives defined in the Taxonomy
1
Regulation ?
1 The six environmental objectives are climate change mitigation and adaptation, sustainable use
and protection of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems.
Yes No Don’t know / no opinion / not relevant
1.2 Accounting standards and rules
Financial accounting standards and rules can have a direct impact on the way in which investment decisions are made since they form the basis of assessments that are carried out to evaluate the financial position and performance of real economy and financial sector companies. In this context, there is an ongoing debate around whether existing financial accounting standards might prove challenging for sustainable and long-term investments. In particular, some experts question whether existing impairment and depreciation rules fully price in the potential future loss in value of companies that today extract, distribute, or rely heavily on fossil fuels, due to a potential future stranding of their assets.
Recognising the importance of ensuring that accounting standards do not discourage sustainable and long-term investments, as part of the 2018 Action Plan on Financing Sustainable Growth , the Commission already requested the European Financial Reporting Advisory Group (EFRAG) to explore potential alternative accounting treatments to fair value measurement for long-term investment portfolios of equity and equity-type instruments. EFRAG issued its advice to the Commission on 30 January 2020. Following this advice, the Commission has requested the IASB to consider the re-introduction of re-cycling through the profit or loss statement of profits or losses realised upon the disposal of equity instruments measured at fair value through other comprehensive income (FVOCI).
Question 16. Do you see any further areas in existing financial accounting rules (based on the IFRS framework) which may hamper the adequate and timely recognition and consistent measurement of climate and environmental risks?
Yes No Don’t know / no opinion / not relevant
Question 16.1 What is in your view the most important area(s)?
Please select as many options as you like.
Impairment and depreciation rules Provision rules Contingent liabilities Other
Please specify which other area(s):
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The IFRS already caters for climate related risks, if the risks are expected to materialize “more likely than
not”. However, it might be necessary to give financial institutions additional guidance in how to incorporate
long-term climate related risks specifically in the Management Commentary Practice Statement. Given that
this guidance should preferably be adopted globally, the IASB, the organization behind the IFRS, could be
the right organization to develop these standards.
1.3 Sustainability research and ratings
A variety of sustainability-related assessment tools (ratings, research, scenario analysis, screening lists, carbon data, ESG benchmarks, etc.) are offered by specialised agencies that analyse individual risks and by traditional providers, such as rating agencies and data providers. In the autumn of 2019, the Commission launched a study on the market structure, providers and their role as intermediaries between companies and investors. The study will also explore possible measures to manage conflicts of interest and enhance transparency in the market for sustainability assessment tools. The results are due in the autumn of 2020. To complement this work, the Commission would like to gather further evidence through this consultation.
Question 17. Do you have concerns on the level of concentration in the market for ESG ratings and data?
1 - Not concerned at all 2 - Rather not concerned 3 - Neutral 4 - Rather concerned 5 - Very concerned Don’t know / no opinion / not relevant
Question 17.1 If necessary, please explain your answer to question 17:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
In the market for ESG data, there are indications that there is an increased risk of dependence and
characteristics of dominant behavior. There is a real risk that sustainability information and sustainabilityrelated
assessment tools become concentrated in the hands of a few private players. This could be costly
and create unwanted dependency. The EU should therefore publish open source data as much as possible
and streamline its existing data outlets (such as Eurostat) with ESG-requirements. The European
Commission should further explore policy options, while taking the caveats as described in the answer to
question 14 into account.
Question 18. How would you rate the comparability, quality and reliability of ESG data from sustainability providers currently available in the market?
1 - Very poor 2 - Poor 3 - Neutral 4 - Good 5 - Very good Don’t know / no opinion / not relevant
Question 18.1 If necessary, please explain your answer to question 18:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 19. How would you rate the quality and relevance of ESG research material currently available in the market?
1 - Very poor 2 - Poor 3 - Neutral 4 - Good 5 - Very good Don’t know / no opinion / not relevant
Question 19.1 If necessary, please explain your answer to question 19:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 20. How would you assess the quality and relevance of ESG ratings for your investment decisions, both ratings of individual Environmental, Social or Governance factors and aggregated ones?
1 2 3 4 5
(very poor (poor quality (neutral) (good quality) (very good) Don't know /
quality and and and No opinion and relevance) relevance) relevance)
relevance)
Individual
Aggregated
Question 20.1 If necessary, please explain your answer to question 20:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 21. In your opinion, should the EU take action in any of these areas?
Yes No Don’t know / no opinion / not relevant
1.4 Definitions, standards and labels for sustainable financial assets and financial products
The market for sustainable financial assets (loans, bonds, funds, etc.) is composed of a wide variety of products, offered under various denominations like ‘green', ‘SDG’, 'transition', ‘ESG’, 'ethical', 'impact', ‘sustainability-linked’, etc. While a variety of products allows for different approaches that can meet the specific needs and wishes of those investing or lending, it can be difficult for clients, in particular retail investors, to understand the different degrees of climate, environmental and social ambition and compare the specificities of each product. Clarity on these definitions through standards and labels can help to protect the integrity of and trust in the market for sustainable financial products, enabling easier access for investors, companies , and savers.
As set out in the 2018 Action Plan on Financing Sustainable Growth , the Commission services started working on:
-
1.developing possible technical criteria for the EU Ecolabel scheme to retail funds, savings and deposits , and
-
2.establishing an EU Green Bond Standard (EU GBS).
-
The Commission also committed to specifying the content of the prospectus for green bond issuances to provide potential investors with additional information, within the framework of the Prospectus Regulation.
EU Green Bond Standard
The Technical Expert Group on Sustainable Finance (TEG) put forward a report in June 2019 with 10 recommendations for how to create an EU Green Bond Standard (EU GBS). This was completed with a usability guide in March 2020, as well as with an updated proposal for the standard (see Annex 1).
The TEG recommends the creation of an official voluntary EU GBS building on the EU Taxonomy. Such an EU Green Bond Standard could finance both physical assets and financial assets (including through covered bonds and assetbacked securities), capital expenditure and selected operating expenditure, as well as specific expenditure for sovereigns and sub-sovereigns. The standard should in the TEG’s view exist alongside existing market standards.
The overall aim of the EU GBS is to address several barriers in the current market, including reducing uncertainty on what is green by linking it with the EU Taxonomy, standardising costly and complex verification and reporting processes, and having an official standard to which certain (financial) incentives may be attached. The TEG has recommended that oversight and regulatory supervision of external review providers eventually be conducted via a centralised system organised by ESMA. However, as such a potential ESMA-led supervision would require legislation and therefore take time, the TEG suggests the set-up of a market-based, voluntary interim registration process for verifiers (the Scheme) of EU Green Bonds for a transition period of up to three years.
Below you will find four questions in relation to the EU GBS. A separate dedicated consultation with regards to a Commission initiative for an EU Green Bond Standard will be carried out in the future . Please note that questions relating to green bond issuances by public authorities are covered in section 2.7 and questions on additional incentives can be found in section 2.6.
Question 22. The TEG has recommended that verifiers of EU Green Bonds (green bonds using the EU GBS) should be subject to an accreditation or authorisation and supervision regime. Do you agree that verifiers of EU Green Bonds should be subject to some form of accreditation or authorisation and supervision?
Yes, at European level Yes, at a national level No Don’t know / no opinion / not relevant
Question 22.1 If necessary, please explain your answer to question 22:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
For example via credit rating agencies.
Question 23. Should any action the Commission takes on verifiers of EU Green Bonds be linked to any potential future action to regulate the market for third-party service providers on sustainability data, ratings and research?
Yes No Don’t know / no opinion / not relevant
Question 23.1 If necessary, please explain your answer to question 23:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 24. The EU GBS as recommended by the TEG is intended for any type of issuer: listed or non-listed, public or private, European or international. Do you envisage any issues for non-European issuers to follow the proposed standard by the TEG?
Yes No Don’t know / no opinion / not relevant
Question 24.1 If necessary, please explain your answer to question 24:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Prospectus and green bonds
Question 25. In those cases where a prospectus has to be published, do you believe that requiring the disclosure of specific information on green bonds in the prospectus, which is a single binding document, would improve the consistency and comparability of information for such instruments and help fight greenwashing?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
Question 25.1 If necessary, please explain your answer to question 25:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 26. In those cases where a prospectus has to be published, to what extent do you agree with the following statement: “Issuers that adopt the EU GBS should include a link to that standard in the prospectus instead of being subject to specific disclosure requirements on green bonds in the prospectus”?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
Question 26.1 If necessary, please explain your answer to question 26:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
We disagree with the wording "instead of". The information that is material for investors to enable them to
make an informed investment decision should be included in the prospectus itself.
Other standards and labels
Already now, the Disclosure Regulation defines two categories of sustainable investment products: those promoting environmental or social characteristics and those with environmental or social objectives, the latter being defined as ‘sustainable investments’. Both types of products have to disclose their use of the EU Taxonomy, for the environmental portion of the product.
Question 27. Do you currently market financial products that promote environmental characteristics or have environmental objectives?
Yes No Don’t know / no opinion / not relevant
Question 28. In its final report, the High-Level Expert Group on Sustainable Finance recommended to establish a minimum standard for sustainably denominated investment funds (commonly referred to as ESG or SRI funds, despite having diverse methodologies), aimed at retail investors.
What actions would you consider necessary to standardise investment funds that have broader sustainability denominations?
No regulatory intervention is needed The Commission or the ESAs should issue guidance on minimum standards Regulatory intervention is needed to enshrine minimum standards in law Regulatory intervention is needed to create a label Don’t know / no opinion / not relevant
Question 29. Should the EU establish a label for investment funds (e.g. ESG funds or green funds aimed at professional investors)?
Yes No Don’t know / no opinion / not relevant
Question 30. The market has recently seen the development of sustainabilitylinked bonds and loans, whose interest rates or returns are dependent on the company meeting pre-determined sustainability targets. This approach is different from regular green bonds, which have a green use-of-proceeds a p p r o a c h .
Should the EU develop standards for these types of sustainability-linked bonds or loans?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
Question 30.1 If necessary, please explain your answer to question 30:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 31: Should such a potential standard for target-setting sustainability-linked bonds make use of the EU Taxonomy as one of the key performance indicators?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
Question 31.1 If necessary, please explain your answer to question 31:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
In general, we welcome initiatives such as green bonds standards, funds, green loans and green retail
products, based on the taxonomy, on the prerequisite that a thorough impact assessment clearly
demonstrates the merits of and support for such standards from the perspective of the intended users.
Question 32. Several initiatives are currently ongoing in relation to energyefficient mortgages (see for instance the work of the EEFIG (Energy Efficiency Financial Institutions Group set by the EC and the United Nations Environment Program Finance Initiative or UNEP FI) on the financial performance of energy efficiency loans or the energy efficient mortgages initiatives) and green loans more broadly. Should the EU develop standards or labels for these types of products?
Yes No Don’t know / no opinion / not relevant
Question 33. The Climate Benchmarks Regulation creates two types of EU climate benchmarks - ‘EU Climate Transition’ and ‘EU Paris-aligned’ - aimed at investors with climate-conscious investment strategies. The regulation also requires the Commission to assess the feasibility of a broader ‘ESG b e n c h m a r k ’ .
Should the EU take action to create an ESG benchmark?
Yes No Don’t know / no opinion / not relevant
Question 34. Beyond the possible standards and labels mentioned above (for bonds, retail investment products, investment funds for professional investors, loans and mortgages, benchmarks), do you see the need for any other kinds of standards or labels for sustainable finance?
Yes No Don’t know / no opinion / not relevant
1.5 Capital markets infrastructure
The recent growth in the market for sustainable financial instruments has raised questions as to whether the current capital markets infrastructure is fit for purpose. Having an infrastructure in place that caters to those types of financial instruments could support and further enhance sustainable finance in Europe.
Question 35. Do you think the existing capital market infrastructure sufficiently supports the issuance and liquidity of sustainable securities?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
Question 36. In your opinion, should the EU foster the development of a sustainable finance-oriented exchange or trading segments that caters specifically to trading in sustainable finance securities and is better aligned with the needs of issuers?
Yes No Don’t know / no opinion / not relevant
Question 36.1 If necessary, please explain your answer to question 36:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
At this time, the Netherlands does not see the need for an EU-sponsored exchange. There should be
significant market imperfections in order to justify this kind of market intervention. The Netherlands does not
have an indication that these significant market imperfections exist. Additionally, we do not see the need for
a specific legal regime with respect to sustainable exchanges either. Sustainable securities are, in the end,
securities and all relevant rules apply to (offering) those securities. Moreover, an EU taxonomy regarding
sustainable investments was developed in order to create a common language that investors can use
everywhere when investing in projects and economic activities that have a substantial positive impact on the
climate and the environment. This will also give market participants tools to better cater to trading in
sustainable securities. We would therefore expect that exchanges or trading segments thereof have enough
tools at their disposal to increase listings of sustainable finance securities and thereby contribute to the
development of sustainable finance. Furthermore, if there is increased demand for sustainable finance
securities, exchanges will have an incentive to fulfill this demand.
Question 37. In your opinion, what core features should a sustainable finance–oriented exchange have in order to encourage capital flows to ESG projects and listing of companies with strong ESG characteristics, in particular SMEs?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
1.6 Corporate governance, long-termism and investor engagement
To reflect long-term opportunities and risks, such as those connected to climate change and environmental degradation, companies and investors need to integrate long-term horizons and sustainability in their decisionmaking processes. However, this is often difficult in a context where market pressure and prevailing corporate culture prompt corporate managers and financial market participants to focus on near-term financial performance at the expense of mid- to long-term objectives. Focusing on short-term returns without accounting for long-term implications may lead to underperformance of the corporation and investors in the long-term, and, by extension, of the economy as a whole. In this context, investors should be driving long-termism, where this is relevant, and not pressure companies to deliver short-term returns by default.
The ongoing COVID-19 outbreak in particular underscores that companies should prioritise the long term interests of their stakeholders. Many companies in the EU have decided to prioritise the interests of key stakeholders, in particular employees, customers and suppliers, over short-term shareholder interest (The European Central Bank also recommended on 27 March 2020 that significant credit institution refrain from distributing dividend so that “they can continue to fulfil their role to fund households, small and medium businesses and corporations” during the COVID-19 economic shock). These factors contribute to driving long-term returns as they are crucial in order to maintain companies’ ability to operate. Therefore, institutional investors have an important role to play in this context. As part of action 10 of the Action Plan on Financing Sustainable Growth , in December 2019 the European Supervisory Authorities delivered reports, the European Supervisory Authorities delivered reports in December 2019 ( ESMA report EBA report , and EIOPA report ) that had the objective of assessing evidence of undue short-term pressure from the financial sector on corporations. They identified areas within their remit where they found some degree of short-termism and issued policy recommendations accordingly. For instance, they advise the adoption of longer-term perspectives among financial institutions through more explicit legal provisions on sustainability.
Question 38. In your view, which recommendation(s) made in the ESAs’ reports have the highest potential to effectively tackle short-termism?
Please select among the following options:
Adopt more explicit legal provisions on sustainability for credit institutions, in particular related to governance and risk management Define clear objectives on portfolio turn-over ratios and holdings periods for institutional investors Require Member States to have an independent monitoring framework to ensure the quality of information disclosed in remuneration reports published by listed companies and funds (UCITS management companies and AIFMs) Other
Question 38.1 Please specify what other recommendation(s) have the highest potential to effectively tackle short-termism:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
In the Netherlands we attach great importance to long-termism. We believe that long term-term value
creation should be central in a company’s strategy and the interests of stakeholders should always be taken
into account. It is economically and socially valuable when companies commit to long-term value creation
and carefully weighing stakeholder interests.
Commitment to long-term value creation contributes, in our opinion, to finding solutions to societal
challenges such as climate change and biodiversity loss and can contribute to healthy labor relations, a
stable business climate and to reducing the burden on the environment. As a result, the potential for longterm
economic growth is increasing.
Question 39. Beyond the recommendations issued by the ESAs, do you see any barriers in the EU regulatory framework that prevent long-termism and/or do you see scope for further actions that could foster long-termism in financial markets and the way corporates operate?
Yes No Don’t know / no opinion / not relevant
Question 39.1 If yes, please explain which barriers you see and / or what action(s) could help foster long-termism in financial markets and the way c o r p o r a t e s o p e r a t e .
Please list a maximum of 3 barrier(s) and / or a maximum of 3 action(s):
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Given the recent implementation of SRD II, which deals with long-termism, it would be good to carry out an
evaluation before deciding on additional rules in this respect.
The Shareholder Rights Directive II states that directors’ variable remuneration should be based on both financial and non-financial performance, where applicable. However, there is currently no requirement regarding what the fraction of variable remuneration should be linked to, when it comes to non-financial performance.
Question 40. In your view, should there be a mandatory share of variable remuneration linked to non-financial performance for corporates and financial institutions?
Yes No Don’t know / no opinion / not relevant
Question 40.1 If yes, please indicate what share of the variable remuneration should be linked to non-financial performance:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
For corporates in general, no, criteria for awarding variable remuneration are a matter to be decided by
companies and their shareholders. It does not require government intervention.
For financial institutions specifically, yes, given the importance of preventing perverse incentives that may
derogate the financial stability and the regard of the interests of the customer a mandatory share of variable
remuneration linked to non-financial performance criteria is necessary. Therefore, the law in the Netherlands
stipulates that at least 50% of the variable remuneration of financial institutions has to be based on nonfinancial
performance criteria.
Which non-financial criteria are used in awarding the variable remuneration is a matter to be decided by
companies, among which financial institutions, and their shareholders.
Question 41. Do you think that a defined set of EU companies should be required to include carbon emission reductions, where applicable, in their lists of ESG factors affecting directors’ variable remuneration?
Yes No Don’t know / no opinion / not relevant
The Shareholder Rights Directive II introduces transparency requirements to better align long-term interests between institutional investors and their asset managers.
Question 42. Beyond the Shareholder Rights Directive II, do you think that EU action would be necessary to further enhance long-term engagement between investors and their investee companies?
Yes No Don’t know / no opinion / not relevant
Question 43. Do you think voting frameworks across the EU should be further harmonised at EU level to facilitate shareholder engagement and votes on ESG issues?
Yes No Don’t know / no opinion / not relevant
Question 44. Do you think that EU action is necessary to allow investors to vote on a company’s environmental and social strategies or performance?
Yes No Don’t know / no opinion / not relevant
Questions have been raised about whether passive index investing could lower the incentives to participate in corporate governance matters or engage with companies regarding their long term strategies.
Question 45: Do you think that passive index investing, if it does not take into account ESG factors, could have an impact on the interests of long-term shareholders?
Yes No Don’t know / no opinion / not relevant
To foster more sustainable corporate governance, as part of action 10 of the 2018 action plan Plan on Financing Sustainable Growth the Commission launched a study on due diligence (i.e. identification and mitigation of adverse social and environmental impact in a company’s own operations and supply chain), which was published in February 2020. This study indicated the need for policy intervention, a conclusion which was supported by both multinational companies and NGOs. Another study on directors’ duties and possible sustainability targets will be finalised in Q2 2020.
Question 46. Due regard for a range of ’stakeholder interests’, such as the interests of employees, customers, etc., has long been a social expectation vis-a-vis companies. In recent years, the number of such interests have expanded to include issues such as human rights violations, environmental p o l l u t i o n a n d c l i m a t e c h a n g e .
Do you think companies and their directors should take account of these interests in corporate decisions alongside financial interests of shareholders, beyond what is currently required by EU law?
Yes, a more holistic approach should favour the maximisation of social, environmental, as well as economic/financial performance. Yes, as these issues are relevant to the financial performance of the company in the long term. No, companies and their directors should not take account of these sorts of interests. Don’t know / no opinion / not relevant
Question 47. Do you think that an EU framework for supply chain due diligence related to human rights and environmental issues should be developed to ensure a harmonised level-playing field, given the uneven development of national due diligence initiatives?
Yes No Don’t know / no opinion / not relevant
Question 48. Do you think that such a supply chain due diligence requirement should apply to all companies, including small and medium sized companies?
Yes No Don’t know / no opinion / not relevant
Question 48.1 If necessary, please explain your answer to question 48:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
At this point the Netherlands assesses a possible revision of its responsible business conduct policies,
including the range of companies these policies should apply to and the option of binding measures on due
diligence.
-
2.Increasing opportunities for citizens, financial institutions and corporates to enhance sustainability
Increased opportunities need to be provided to citizens, financial institutions and corporates in order to enable them to have a positive impact on sustainability. Citizens can be mobilised by providing them with opportunities to invest their pensions and savings sustainably or by using digital tools to empower them to make their communities, their homes and their businesses more resilient. Financial institutions and corporates can increase their contribution to sustainability if the right policy signals and incentives are in place. Furthermore, international cooperation and the use of sustainable finance tools and frameworks in developing countries can help build a truly global response to the climate and environmental crisis.
As part of the European Green Deal, the Commission has launched a European Climate Pact to bring together regions, local communities, civil society, businesses and schools in the fight against climate change, incentivising behavioural change from the level of the individual to the largest multinational, and to launch a new wave of actions. A consultation on the European Climate Pact is open until 27 May 2020 in order to better identify the areas where the Commission could support and highlight pledges as well as set up fora to work together on climate action (including possibly on sustainable finance).
2.1 Mobilising retail investors and citizens
Although retail investors today are increasingly aware that their own investments and deposits can play a role in achieving Europe’s climate and environmental targets, they are not always offered sustainable financial products that match their expectations. In order to ensure that the sustainability preferences of retail investors are truly integrated in the financial system, it is crucial to help them to better identify which financial products best correspond to these preferences, providing them with user-friendly information and metrics they can easily understand. To that end, the European Commission will soon publish the amended delegated acts of MIFID II and IDD, which will require investment advisors to ask retail investors about their sustainability preferences.
Question 49. In order to ensure that retail investors are asked about their sustainability preferences in a simple, adequate and sufficiently granular way, would detailed guidance for financial advisers be useful when they ask questions to retail investors seeking financial advice?
Yes No Don’t know / no opinion / not relevant
Question 49.1 If necessary, please explain your answer to question 49:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 50. Do you think that retail investors should be systematically offered sustainable investment products as one of the default options, when the provider has them available, at a comparable cost and if those products meet the suitability test?
Yes No Don’t know / no opinion / not relevant
Question 51. Should the EU support the development of more structured actions in the area of financial literacy and sustainability, in order to raise awareness and knowledge of sustainable finance among citizens and finance professionals?
1 - Strongly disagree 2 - Disagree 3 - Neutral 4 - Agree 5 - Strongly agree Don’t know / no opinion / not relevant
2.2 Better understanding the impact of sustainable finance on sustainability factors
While sustainable finance is growing, there are questions on how to measure and assess the positive impact of sustainable finance on the real economy. Recently, tools have been developed that can be used to approximate an understanding of the climate and environmental impact of economic activities that are being financed. Examples of such tools include the EU Taxonomy, which identifies under which conditions economic activities can be considered environmentally sustainable, use-of-proceeds reporting as part of green bond issuances, or the Disclosure Regulation, which requires the reporting of specific adverse impact indicators.
Yet, an improved understanding of how different sustainable financial products impact the economy may further increase their positive impact on sustainability factors and accelerate the transition.
Question 52. In your view, is it important to better measure the impact of financial products on sustainability factors?
1 - Not important at all 2 - Rather not important 3 - Neutral 4 - Rather important 5 - Very important Don’t know / no opinion / not relevant
Question 52.1 What actions should the EU take in your view?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Yes, in dealing with sustainability, it is important to acknowledge double materiality perspective. Thus, to not
only account for the impact of climate-related and environmental risks on the financial institution, but also to
account for the (direct and indirect) impact of an institution’s activities on the environment.
Question 53: Do you think that all financial products / instruments (e.g. shares, bonds, ETFs, money market funds) have the same ability to allocate capital to sustainable projects and activities?
Yes No Don’t know / no opinion / not relevant
2.3 Green securitisation
Securitisation is a technique that converts illiquid assets, such as bank loans or trade receivables, into tradeable securities. As a result, banks can raise fresh money as well as move credit risk out of their balance sheets, thereby freeing up capital for new lending. Securitisation also facilitates access to a greater range of investors, who can benefit from the banks’ expertise in loan origination and servicing, thereby diversifying risk exposure. Green securitisations and collaboration between banks and investors could play an important role in financing the transition as banks’ balance sheet space might be too limited to overcome the green finance gap. The EU’s new securitisation framework creates a specific framework for high-quality Simple, Transparent and Standardised (STS) securitisations, together with a more risk-sensitive prudential treatment for banks and insurers.
Question 54. Do you think that green securitisation has a role to play to increase the capital allocated to sustainable projects and activities?
1 - Not important at all 2 - Rather not important 3 - Neutral 4 - Rather important 5 - Very important Don’t know / no opinion / not relevant
Question 54.1 If necessary, please explain your answer to question 54:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Green securitization could support economic growth and financial stability by enabling issuers and investors
to diversify green risks. By opening up new avenues for raising capital, green securitization can aid in
diversifying the funding base of the green economy. It can also help free up bank capital, which could
potentially allow banks to extend new green credit to the economy.
Question 55: Do the existing EU securitisation market and regulatory frameworks, including prudential treatment, create any barriers for securitising ‘green assets’ and increasing growth in their secondary market?
Yes No Don’t know / no opinion / not relevant
Question 56. Do you see the need for a dedicated regulatory and prudential framework for ‘green securitisation’?
Yes No Don’t know / no opinion / not relevant
2.4 Digital sustainable finance
The ongoing COVID-19 outbreak is highlighting the key role of digitalisation for the daily personal and professional lives of many Europeans. However, it has also revealed how digital exclusion can exacerbate financial exclusion – a risk that needs to be mitigated.
Digitalisation is transforming the provision of financial services to Europe’s businesses and citizens As shown in the Pro gress Report of the UN Secretary-General’s Task Force on Digital Financing of the Sustainable Development Goals (SDGs) , digital finance brings a wide array of opportunities for citizens worldwide by making it easier to make payments, save money, invest, or get insured. However, digital finance also brings new risks, such as deepening the digital divide. It is therefore paramount to ensure that the potential of digitalisation for sustainable finance is fully reaped, while mitigating associated challenges appropriately. In this context, the Commission has launched a consultation dedicated to digital finance.
In the area of sustainable finance, technological innovation such as Artificial intelligence (AI) and machine learning can help to better identify and assess to what extent a company’s activities, a large equity portfolio, or a bank’s assets are sustainable. The application of Blockchain and the Internet of Things (IoT) may allow for increased transparency and accountability in sustainable finance, for instance with automated reporting and traceability of use of proceeds for green bonds.
Question 57. Do you think EU policy action is needed to help maximise the potential of digital tools for integrating sustainability into the financial sector?
Yes No Don’t know / no opinion / not relevant
In particular, digitalisation has the potential to empower citizens and retail investors to participate in local efforts to build climate resilience. For instance, M-Akiba is a Government of Kenya-issued retail bond that seeks to enhance financial inclusion for economic development. Money raised from issuance of M-Akiba is dedicated to infrastructural development projects, both new and ongoing.
Question 58. Do you consider that public authorities, including the EU and Member States should support the development of digital finance solutions that can help consumers and retail investors to better channel their money to finance the transition?
Yes No Don’t know / no opinion / not relevant
Question 59. In your opinion, should the EU, Member States, or local authorities use digital tools to involve EU citizens in co-financing local sustainable projects?
Yes No Don’t know / no opinion / not relevant
2.5. Project Pipeline
The existing project pipeline (availability of bankable and investable sustainable projects) is generally considered to be insufficient to meet current investor demand for sustainable projects. Profitability of existing business models plays a role, with some projects (e.g. renewable energy), being more bankable than others (e.g. residential energy efficiency). Identifying the key regulatory and market obstacles that exist at European and national level will be key in order to fix the pipeline problem. Please note that questions relating to incentives are covered in section 2.6.
Question 60. What do you consider to be the key market and key regulatory obstacles that prevent an increase in the pipeline of sustainable projects?
Please list a maximum of 3 for each:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The Netherlands considers the lack of clear and well-developed business cases by project developers and
the (perceived) unprofitable risk/reward ratio as key market obstacles.
The key regulatory obstacles are the lack of pricing-in of environmentally damaging effects.
Question 61. Do you see a role for Member States to address these obstacles through their NECPs (National Energy and Climate Plans)?
Yes No Don’t know / no opinion / not relevant
Question 61.1 If necessary, please explain your answer to question 60 and provide details:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 62. In your view, how can the EU facilitate the uptake of sustainable finance tools and frameworks by SMEs and smaller professional investors?
Please list a maximum of 3 actions you would like to see at EU-level:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 63. The transition towards a sustainable economy will require significant investment in research and innovation (R&I) to enable rapid commercialisation of promising and transformational R&I solutions, including possible disruptive and breakthrough inventions or business m o d e l s .
How could the EU ensure that the financial tools developed to increase sustainable investment flows turn R&I into investable (bankable) opportunities?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The EU should provide additional support to certain companies or projects in the scale-up phase. These
companies or projects should have below market risk/reward ratio‘s, have a ROI above 0, and engage with
technologies that we need, to stay within the 2 degrees scenarios.
Question 64. In particular, would you consider it useful to have a category for R&I in the EU Taxonomy?
Yes No Don’t know / no opinion / not relevant
Question 65. In your view, do you consider that the EU should take further action in:
Don't
Yes No know / No
opinion
Bringing more financial engineering to sustainable R&I projects?
Assisting the development of R&I projects to reach investment-ready stages, with volumes, scales, and riskreturn profiles that interest investors (i.e. ready and bankable projects that private investors can easily identify)?
Better identifying areas in R&I where public intervention is critical to crowd in private funding?
Ensuring alignment and synergies between Horizon Europe i and other EU programmes/funds?
Conducting more research to address the high risks associated with sustainable R&I investment (e.g. policy frameworks and market conditions)?
Identifying and coordinating R&I efforts taking place at EU, national and international levels to maximise value and avoid duplication?
Facilitating sharing of information and experience regarding successful low-carbon business models, research gaps and innovative solutions?
Increasing the capacity of EU entrepreneurs and SMEs to innovate and take risks?
Question 65.1 If necessary, please explain your answers to question 65:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
2.6 Incentives to scale up sustainable investments
While markets for sustainable financial assets and green lending practices are growing steadily, they remain insufficient to finance the scale of additional investments needed to reach the EU’s environmental and climate action objectives, including climate-neutrality by 2050. For instance, companies’ issuances of sustainable financial assets (bonds, equity) and sustainable loans currently do not meet investors’ increasing interest. The objective of the European Green Deal Investment Plan, published on 14 January 2020, is to mobilise through the EU budget and the associated instruments at least EUR 1 trillion of private and public sustainable investments over the coming decade. The purpose of this section is to identify whether there are market failures or barriers that would prevent the scaling up of sustainable finance, and if yes what kinds of public financial incentives could help rectify this.
Question 66. In your view, does the EU financial system face market barriers and inefficiencies that prevent the uptake of sustainable investments?
1 - Not functioning well at all 2 - Not functioning so well 3 - Neutral 4 - Functioning rather well 5 - Functioning very well Don’t know / no opinion / not relevant
Question 66.1 If necessary, please explain your answers to question 66:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The risk-return trade-off of financial institutions should tip towards sustainable financial products to stimulate
private sustainable investment. In order to tip this balance, two market barriers or inefficiencies should be
resolved.
Financial institutions do not take environmental costs, or negative externalities, into account in their
investment decisions. Government policy can play an essential role in pricing these externalities. By pricing
societal costs, financial institutions are stimulated to consider them in their risk-return trade-off. They will
minimize costs and might therefore choose sustainable investment over regular or brown investment.
Additionally, the pricing of societal costs will also translate in the valuation of companies. Sustainable
companies will increase in value in comparison to polluting companies. This will form an additional incentive
for sustainable investment.
Secondly, governments should facilitate long-term investors by providing consistent, clear and credible
sustainability policy. This way governments can reduce the risks associated with sustainable finance. This
can tip the risk-return trade-off towards sustainable investment. It will also help prevent the tragedy of the
horizon, in which investors lose sight of long-term development. Government can stimulate this by for
example providing transition pathways.
Question 67. In your view, to what extent would potential public incentives for issuers and lenders boost the market for sustainable investments?
1 - Not effective at all 2 - Rather not effective 3 - Neutral 4 - Rather effective 5 - Very effective Don’t know / no opinion / not relevant
Question 68. In your view, for investors (including retail investors), to what extent would potential financial incentives help to create a viable market for sustainable investments?
1 - Not effective at all 2 - Rather not effective 3 - Neutral 4 - Rather effective 5 - Very effective Don’t know / no opinion / not relevant
Please specify the reasons for your answer (provide if possible links to quantitative evidence) and the category of investor to whom it should be addressed (retail, professional, institutional, other):
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 69. In your view, should the EU consider putting in place specific incentives that are aimed at facilitating access to finance for SMEs carrying out sustainable activities or those SMEs that wish to transition?
Yes No Don’t know / no opinion / not relevant
2.7 The use of sustainable finance tools and frameworks by public authorities
Even though the potential scope of sustainable finance is broad, it is often viewed as being only confined to the ambit of private financial flows within capital markets. Nevertheless, the boundary between public and private finance is not always strict and some concepts that are generally applied to private finance could also be considered for the public sector, such as the EU Taxonomy. This is recognised in the European Green Deal Investment Plan and the C limate Law , where the Commission committed to exploring how the EU Taxonomy can be used in the context of the European Green Deal by the public sector, beyond InvestEU i. The InvestEU i programme, proposed as part of the EU’s Multiannual Financial Framework 2021 – 2027, combines public and private funding and once the taxonomy is in place (from end-2020 onwards) will serve as a test case for its application in public sector-related spending.
Question 70. In your view, is the EU Taxonomy, as currently set out in the rep ort of the Technical Expert Group on Sustainable Finance , suitable for use by the public sector, for example in order to classify and report on green expenditures?
Yes Yes, but only partially No Don’t know / no opinion / not relevant
Question 71. In particular, is the EU Taxonomy, as currently set out in the rep ort of the Technical Expert Group on Sustainable Finance , suitable for use by the public sector in the area of green public procurement?
Yes Yes, but only partially No Don’t know / no opinion / not relevant
2
Question 72. In particular, should the EU Taxonomy play a role in the context of public spending frameworks at EU level, i.e. EU spending programmes such as EU funds, Structural and Cohesion Fund is and EU state aid rules, where appropriate?
2 The six environmental objectives set out in the Taxonomy Regulation are the following: (1) climate
change mitigation, (2) climate change adaptation, (3) sustainable use and protection of water and marine resources, (4) transition to a circular economy, (5) pollution prevention and control, (6) protection and restoration of biodiversity and ecosystems.
Yes, the taxonomy with climate and environmental objectives set out in the Taxonomy Regulation Yes, but only if social objectives are incorporated in the EU Taxonomy, as recommended by the TEG, and depending on the outcome of the report that the Commission must publish by 31 December 2021 in line with the review clause of the political agreement on the Taxonomy Regulation No Don’t know / no opinion / not relevant
Question 72.1 If yes, what role should it play and is the taxonomy, as currently set out in the report of the Technical Expert Group on Sustainable Finance, suitable for the following purposes?
In the context of some EU spending programmes In the context of EU state aid rules Other
Please explain if the EU Taxonomy is suitable for the purpose of EU spending programmes and what role it should play in this context:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 73. Should public issuers, including Member States, be expected to make use of a future EU Green Bond Standard for their green bond issuances, including the issuance of sovereign green bonds in case they decide to issue this kind of debt?
Yes No Don’t know / no opinion / not relevant
2.8 Promoting intra-EU cross-border sustainable investments
In order to attract and encourage cross-border investments, a range of investment promotion services have been put in place by public authorities. Investment promotion services include for instance information on the legal framework, advice on the project, such as on financing, partner and location search, support in completing authorisations and problem-solving mechanisms relating to issues of individual or general relevance. In some cases specific support is provided for strategic projects or priority sectors.
Question 74. Do you consider that targeted investment promotion services could support the scaling up of cross-border sustainable investments?
Yes No Don’t know / no opinion / not relevant
2.9 EU Investment Protection Framework
To encourage long-term sustainable investments in the EU, it is essential that investors are confident that their investments will be effectively protected throughout their life-cycle in relation to the state where they are located. The EU investment protection framework includes the single market fundamental freedoms, property protection from expropriation, the principles of legal certainty, legitimate expectations and good administration which ensure a stable and predictable environment, including remedies and enforcement in national courts. These elements can have an impact on cross-border investment decisions, especially for long-term investments. While a separate consultation on investment protection will take place soon, the purpose of this section is to investigate whether the above-mentioned factors have an impact on sustainable projects in particular, such as for instance for long-term infrastructure and innovation projects necessary for the EU's industrial transition towards a sustainable economy.
Question 75. Do you consider that the investment protection framework has an impact on decisions to engage in cross-border sustainable investment?
Please choose one of the following:
Investment protection has no impact Investment protection has a small impact (one of many factors to consider) Investment protection has medium impact (e.g. it can lead to an increase in costs) Investment protection has a significant impact (e.g. influence on scale or type of investment) Investment protection is a factor that can have a decisive impact on crossborder investments decisions and can result in cancellation of planned or withdrawal of existing investments Don’t know / no opinion / not relevant
2.10 Promoting sustainable finance globally
The global financial challenge posed by climate change and environmental degradation requires an internationally coordinated . To complement the work done by the Network of Central Banks and Supervisors for Greening the Financial system (NGFS) on climate-related risks and the Coalition of Finance Ministers for Climate Action mainly on public budgetary matters and fiscal policies, the EU has launched together with the relevant public authorities from like-minded countries the International Platform on Sustainable Finance (IPSF) . The purpose of the IPSF is to promote integrated markets for environmentally sustainable investment at a global level. It will deepen international coordination on approaches and initiatives that are fundamental for private investors to identify and seize environmentally sustainable investment opportunities globally, in particular in the areas of taxonomy, disclosures, standards and labels.
Question 76. Do you think the current level of global coordination between public actors for sustainable finance is sufficient to promote sustainable finance globally as well as to ensure coherent frameworks and action to deliver on the Paris Agreement and/or the UN Sustainable Development Goals (SDGs)?
1 - Highly insufficient 2 - Rather insufficient 3 - Neutral 4 - Rather sufficient 5 - Fully sufficient Don’t know / no opinion / not relevant
Question 77. What can the Commission do to facilitate global coordination of the private sector (financial and non-financial) in order to deliver on the goals o f t h e P a r i s A g r e e m e n t a n d / o r S D G s ?
Please list a maximum of 3 proposals:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The Dutch financial sector has committed itself to the Dutch national climate agreement and pledged to align
their portfolios with the Paris Agreement. Many financial institutions around the world have committed
themselves to do so as well. We welcome initiatives that would help develop international standards and
coordinate private sector alignment globally with the Paris Agreement, for instance in the context of the
COP26.
Furthermore, the TCFD-framework gives companies guidance to identify and act upon climate related risks.
The Dutch government would like to explore whether, on top of current IFRS-standards, it is desirable to give
financial institutions and listed companies more guidance in incorporating climate related risks in their
reporting. The goals of such an endeavor would be to declare these standards binding for jurisdictions
around the globe. We would welcome a coordinated European initiative to get in touch with the IASB to
explore whether this would fit in their program. Additionally, we would welcome a European initiative to
discuss global climate risk standards at the COP26.
Question 78. In your view, what are the main barriers private investors face when financing sustainable projects and activities in emerging markets and d e v e l o p i n g e c o n o m i e s ?
Please select all that apply:
Please select as many options as you like.
Lack of internationally comparable sustainable finance frameworks (standards, taxonomies, disclosure, etc.) Lack of clearly identifiable sustainable projects on the ground Excessive (perceived or real) investment risk Difficulties to measure sustainable project achievements over time Other
Question 79. In your opinion, in the context of European international cooperation and development policy, how can the EU best support the mobilisation of international and domestic private investors to finance sustainable projects and activities in emerging markets and developing countries, whilst avoiding market distortions?
Please provide a maximum of 3 proposals:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 80. How can EU sustainable finance tools (e.g. taxonomy, benchmarks, disclosure requirements) be used to help scale up the financing of sustainable projects and activities in emerging markets and/or developing e c o n o m i e s ?
Which tools are best-suited to help increase financial flows towards and within these countries and what challenges can you identify when i m p l e m e n t i n g t h e m ?
Please select among the following options:
All EU sustainable finance tools are already suitable and can be applied to emerging markets and/or developing economies without any change Some tools can be applied, but not all of them These tools need to be adapted to local specificities in emerging markets and /or developing economies Don’t know / no opinion / not relevant
Question 81. In particular, do you think that the EU Taxonomy is suitable for use by development banks, when crowding in private finance, either through guarantees or blended finance for sustainable projects and activities in emerging markets and/or developing economies?
Yes Yes, but only partially No Don’t know / no opinion / not relevant
-
3.Reducing and managing climate and environmental risks
Climate and environmental risks, including relevant transition risks, and their possible negative social impacts, can have a disruptive impact on our economies and financial system, if not managed appropriately. Against this background, the
3
three European supervisory authorities (ESAs) have each developed work plans on sustainable finance . Building, among others, on the ESAs’ activities further actions are envisaged to improve the management of climate and environmental risks by all actors in the financial system. In particular, the political agreement on the Taxonomy Regulation tasks the Commission with publishing a report on the provisions required for extending its requirements to activities that do significantly harm environmental sustainability (the so-called “brown taxonomy”).
3 More information on the ESAs’ activities on sustainable finance is available on the authorities’ websites. See in particular ESMA’
s strategy EBA Action Plan , , and EIOPA’s dedicated webpage .
3.1 Identifying exposures to harmful activities and assets and disincentivising environmentally harmful investments
Question 82. In particular, do you think that existing actions need to be complemented by the development of a taxonomy for economic activities that are most exposed to the transition due to their current negative environmental impacts (the so-called “brown taxonomy”) at EU level, in line with the review clause of the political agreement on the Taxonomy Regulation?
Yes No Don’t know / no opinion / not relevant
Question 82.1 If yes, what would be the purpose of such a brown taxonomy?
Please (select all that apply):
Please select as many options as you like.
Help supervisors to identify and manage climate and environmental risks Create new prudential tools, such as for exposures to carbon-intensive industries Make it easier for investors and financial institutions to voluntarily lower their exposure to these activities Identify and stop environmentally harmful subsidies Other
Question 83: Beyond a sustainable and a brown taxonomy, do you see the need for a taxonomy which would cover all other economic activities that lie in between the two ends of the spectrum, and which may have a more limited negative or positive impact, in line with the review clause of the political agreement on the Taxonomy Regulation?
Yes No Don’t know / no opinion / not relevant
Question 83.1 If yes, what should be the purpose of such a taxonomy?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The current taxonomy will define environmentally sustainable economic activities. During the negotiations of
the legislative file that was published last month, the aim of the Dutch government was to provide the
financial sector with guidance into which economic activities additional investments are needed.
The Dutch government deems the development of a broader taxonomy desirable. A general taxonomy, i.e.
one that defines brown economic activities, will help financial institutions and supervisors map sustainability
related risks. The taxonomy should develop into a forward looking tool: it should guide large financial and
non-financial companies towards a path to a greener future.
3.2 Financial stability risk
The analysis and understanding of the impact of climate-related and environmental risks on financial stability is improving, thanks in particular to the work done by supervisors and central banks (see for instance the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) ), regulators and research centres. However, significant progress still needs to be made in order to properly understand and manage the impact of these risks.
Question 84. Climate change will impact financial stability through two main channels: physical risks, related to damages from climate-related events, and transition risks, related to the effect of mitigation strategies, especially if these are adopted late and abruptly. In addition, second-order effects (for instance the impact of climate change on real estate prices) can further w e a k e n t h e w h o l e f i n a n c i a l s y s t e m .
What are in your view the most important channels through which climate c h a n g e w i l l a f f e c t y o u r i n d u s t r y ?
Please select all that apply:
Please select as many options as you like.
Physical risks Transition risks Second-order effects Other
Question 85. What key actions taken in your industry do you consider to be relevant and impactful to enhance the management of climate and e n v i r o n m e n t r e l a t e d r i s k s ?
Please identify a maximum of 3 actions taken in your industry
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The government has an import role to play to enhance the management of environment related risks. Two
actions governments could take are:
-
1.Putting a price on adverse effects of economic activity on sustainability (i.e. pricing negative externalities).
This could tip the risk-return trade-off towards sustainable finance.
-
2.Providing climate policy certainty. Financial institution require consistent, clear and credible climate policy
to reduce certain risks of sustainable investment. Clear transition pathways could provide this policy certainty
and ensure the stability of the financial system.
Question 86. Following the financial crisis, the EU has developed several new macro-prudential instruments, in particular for the banking sector (CRR /CRDIV), which aim to address systemic risk in the financial system.
Do you consider the current macro-prudential policy toolbox for the EU financial sector sufficient to identify and address potential systemic financial stability risks related to climate change?
1 - Highly insufficient 2 - Rather insufficient 3 - Neutral 4 - Rather sufficient 5 - Fully sufficient Don’t know / no opinion / not relevant
Question 86.1 If you think the current macro-prudential policy toolbox for the EU financial sector is not sufficient to identify and address potential systemic financial stability risks related to climate change, what solution would you p r o p o s e ?
Please list a maximum of 3 solutions:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
The Netherlands believes that the current prudential requirements in general could be strengthened with
regard to climate related risks. We think that supervisors should have more options to address those risks,
including in the capital requirements framework, for example by indeed incorporating it in the macro
prudential toolkit (and/or Pillar 2). Important is that the capital requirement remains risk-based, i.e. more
capital should be held if there are higher (systemic) risks. The EBA is currently doing research into this topic.
It would be valuable if the EBA could present the results of this research as soon as possible. Furthermore,
we think that next steps to address climate related risks could be taken in the implementation of Basel 3.5,
for example in the design of risk models.
Insurance prudential framework
Insurers manage large volumes of assets on behalf of policyholders and they can therefore play an important role in the transition to a sustainable economy. At the same time, insurance companies have underwriting liabilities exposed to sustainability risks. In addition, the (re)insurance sector plays a key role in managing risks arising from natural catastrophes though risk-pooling and influencing risk mitigating behaviour. The Solvency II Directive sets out the prudential framework for insurance companies. The Commission requested technical advice from the European Insurance and Occupation Pensions Authority (EIOPA) on the integration of sustainability risks and sustainability factors in Solvency II. The Commission also mandated EIOPA to investigate whether there is undue volatility of liabilities in the balance sheet or undue impediments to long-term investments, as part of the 2020 Review of Solvency II. The Commission also mandated EIOPA to investigate whether there is undue volatility of their solvency position that may impede to long-term investments, as part of the 2020 Review of Solvency II. EIOPA is expected to submit its final advice in June 2020.
In September 2019, EIOPA already provided an opinion on sustainability within Solvency II . EIOPA identified additional practices that should be adopted by insurance companies to ensure that sustainability risks are duly taken into account in companies’ risk management.
On that basis, the Commission could consider clarifications of insurers’ obligations as part of the review of the Solvency II Directive. Stakeholders will soon be invited to comment on the Commission’s inception impact assessment as regards the review. The Commission will also launch a public consultation as part of the review.
Question 87. Beyond prudential regulation, do you consider that the EU should take further action to mobilise insurance companies to finance the transition and manage climate and environmental risks?
Yes No Don’t know / no opinion / not relevant
Banking prudential framework
In the context of the last CRR/D review, co-legislators agreed on three actions aiming at integrating ESG considerations into EU banking regulation:
a mandate for the EBA to assess and possibly issue guidelines regarding the inclusion of ESG risks in the supervisory review and evaluation process (SREP) (Article 98(8) CRD);
a requirement for large, listed institutions to disclose ESG risks (Article 449a CRR) (note that some banks are
also in the scope of the NFRD;
a mandate for the EBA to assess whether a dedicated prudential treatment of exposures related to assets or activities associated substantially with sustainability objectives would be justified (Article 501c CRR).
Because the work on ESG risks was at its initial stages, co-legislators agreed on a gradual approach to tackling those risks. However, given the new objectives under the European Green Deal, it can be argued that the efforts in this area need to be scaled up in order to support a faster transition to a sustainable economy and increase the resilience of physical assets to climate and environmental risks. Integrating sustainability considerations in banks’ business models requires a change in culture which their governance structure needs to effectively reflect and support.
Question 88. Do you consider that there is a need to incorporate ESG risks into prudential regulation in a more effective and faster manner, while ensuring a level-playing field?
Yes No Don’t know / no opinion / not relevant
Question 88.1 If yes, is there any category of assets that could warrant a more risk-sensitive treatment? Are there any other prudential measures that could help promoting in a prudentially sound way the role of the EU banking sector in funding the transition to a more sustainable economy?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 89. Beyond prudential regulation, do you consider that the EU should:
-
1.take further action to mobilise banks to finance the transition?
-
2.manage climate-related and environmental risks?
Yes, option 1. or option 2. or both options No Don’t know / no opinion / not relevant
Question 89.1 If yes, please specify which action(s) would be relevant:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 90. Beyond the possible general measures referred to in section 1.6, would more specific actions related to banks’ governance foster the integration, the measurement and mitigation of sustainability risks and impacts into banks’ activities?
Yes No Don’t know / no opinion / not relevant
Asset managers
Traditionally, the integration of material sustainability factors in portfolios, with respect to both their selection and management, has considered only their impact on the financial position and future earning capacity of a portfolio's holdings (i.e., the 'outside-in' or 'financial materiality' perspective). However, asset managers should take into account also the impact of a portfolio on society and the environment (i.e., the 'inside-out' or 'environmental/social materiality' perspective). This so-called “double materiality” perspective lies at the heart of the Disclosure Regulation , which makes it clear that a significant part of the financial services market must consider also their adverse impacts on sustainability (i.e. negative externalities).
Question 91. Do you see merits in adapting rules on fiduciary duties, best interests of investors/the prudent person rule, risk management and internal structures and processes in sectorial rules to directly require them to consider and integrate adverse impacts of investment decisions on sustainability (negative externalities)?
Yes No Don’t know / no opinion / not relevant
Pension providers
Pension providers’ long-term liabilities make them an important source of sustainable finance. They have an inherently long-term approach, as the beneficiaries of retirement schemes expect income streams over several decades. Compared with other institutions, pension providers’ long-term investment policies also make their assets potentially more exposed to long-term risks. Thus far, the issues of sustainability reporting and ESG integration by EU pension providers have been taken up in the areas of institutions for occupational retirement provision (IORPs) (“Pillar II” - covered at EU level by the IORP II Directive ) and private voluntary plans for personal pensions (“Pillar III” – covered at EU level by the PEPP Regulation ) already in 2016 and 2017 respectively. The Commission will review the IORP II Directive by January 2023 and report on its implementation and effectiveness.
However, according to a stress test on IORPs run by EIOPA in 2019 and assessing for the first time the integration of ESG factors in IORPs’ risk management and investment allocation, only about 30% of IORPs in the EU have a strategy in place to manage ESG-related risks to their investments. Moreover, while most IORPs claimed to have taken appropriate steps to identify ESG risks to their investments, only 19% assess the impact of ESG factors on
3
investments’ risks and returns . Lastly, the study provided a preliminary quantitative analysis of the investment portfolio (with almost 4 trillion Euros of assets under management, the EEA’s Institutions for Occupational Retirement Provision (IORPs) sector is an important actor on financial markets.) which would indicate significant exposures of the IORPs in the sample to business sectors prone to high greenhouse gas emissions.
In 2017, the Commission established a High level group of experts on pensions to provide policy advice on matters related to supplementary pensions. In its report, the group recommended that the EU, its Member States and the social partners further clarify how pension providers can take into account the impact of ESG factors on investment decisions and develop cost-effective tools and methodologies to assess the vulnerability of EU pension providers to long-term environmental and social sustainability risks. The group also pointed out that, in the case of IORPs which are collective schemes, it might be challenging to make investment decisions reconciling possibly diverging views of individual members and beneficiaries on ESG investment. Moreover, in 2019, EIOPA issued an opinion on the supervision of the management of ESG risks faced by IORPs.
3 The analysis shows that the preparedness of pension schemes to integrate sustainability factors is widely dispersed and seems
correlated to how advanced national frameworks were. IORP II directive sets minimum harmonisation and was expected to be transposed in national law by January 2019 (and hence could not necessarily be expected to be implemented by end-2018 for the EIOPA survey for the 2019 stress test).
Question 92. Should the EU explore options to improve ESG integration and reporting above and beyond what is currently required by the regulatory framework for pension providers?
Yes No Don’t know / no opinion / not relevant
Question 93. More generally, how can pension providers contribute to the achievement of the EU’s climate and environmental goals in a more proactive way, also in the interest of their own sustained long-term performance? How can the EU facilitate the participation of pension providers to such transition?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 94. In view of the planned review of the IORP II Directive in 2023, should the EU further improve the integration of members’ and beneficiaries’ ESG preferences in the investment strategies and the management and governance of IORPs?
Yes No Don’t know / no opinion / not relevant
3.3 Credit rating agencies
Regulation 1060/2009 requires credit rating agencies (CRAs) to take into account all factors that are ‘material’ for the probability of default of the issuer or financial instrument when issuing or changing a credit rating or rating outlook. This covers also ESG factors. According to ESMA’s advice on credit rating sustainability issues and disclosure requirements , the extent to which ESG factors are being considered can vary significantly across asset classes, based on each CRA’s methodology.
Following the 2018 Action Plan on Financing Sustainable Growth , in response to concerns about the extent to which ESG factors were considered by CRAs, ESMA adopted guidelines on disclosure requirements for credit ratings and rating outlooks. ESMA’s Guidelines on these disclosure requirements will become applicable as of April 2020. Pursuant to the guidelines, CRAs should report in which cases ESG factors are key drivers behind the change to the credit rating or rating outlook. Consequently, the current landscape will change in the coming months. The Commission services intend to report on the progress regarding disclosure of ESG considerations by CRAs in 2021.
Question 95. How would you assess the transparency of the integration of ESG factors into credit ratings by CRAs?
1 - Not transparent at all 2 - Rather not transparent 3 - Neutral 4 - Rather transparent 5 - Very transparent Don’t know / no opinion / not relevant
Question 95.1 If necessary, please explain your answer to question 95:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 96. How would you assess the effectiveness of the integration of ESG factors into credit ratings by CRAs?
1 - Not effective at all 2 - Rather not effective 3 - Neutral 4 - Rather effective 5 - Very effective Don’t know / no opinion / not relevant
Question 96.1 If necessary, please explain your answer to question 96:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Question 97. Beyond the guidelines, in your opinion, should the EU take further actions in this area?
Yes No Don’t know / no opinion / not relevant
3.4. Natural capital accounting or “environmental footprint”
Internal tools, such as the practice of natural capital accounting, can help inform companies’ decision-making based on the impact of their activities on sustainability factors. Natural capital accounting or “environmental footprinting” has the potential to feed into business performance management and decision-making by explicitly mapping out impacts (i.e. the company’s environmental footprint across its value chain) and dependencies on natural capital resources and by placing a monetary value on them. In order to ensure appropriate management of environmental risks and mitigation opportunities, and reduce related transaction costs, the Commission will support businesses and other stakeholders in developing standardised natural capital accounting practices within the EU and internationally.
Question 100. Are there any specific existing initiatives (e.g. private, public or other) you suggest the Commission should consider when supporting more businesses and other stakeholders in implementing standardised natural capital accounting/environmental footprinting practices within the EU and internationally?
Yes No Don’t know / no opinion / not relevant
Question 98.1 If yes, please list a maximum of 3 initiatives:
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
It is important that financial institutions use standardized natural capital accounting methods. There is a
limited number of well-crafted methods available that can quickly scale up to assist institutions. We would
recommend either PCAF or the PACTA method for climate impact and PBAF for biodiversity footprint. These
methods have proven to be successful in providing insight in informing a financial institution’s decision on
sustainability factors.
3.5. Improving resilience to adverse climate and environmental impacts
(Please note that the Commission is also preparing an upgraded EU Adaptation Strategy. A dedicated public consultation will be launched soon).
Climate-related loss and physical risk data
Investors and asset owners, be they businesses, citizens or public authorities, can better navigate and manage the increased adverse impacts of a changing climate when given access to decision-relevant data. Although many non-life insurance undertakings have built up significant knowledge, most other financial institutions and economic actors have a limited understanding of (increasing) climate-related physical risks.
A wider-spread and more precise understanding of current losses arising from climate- and weather-related events is hence crucial to assess macro-economic impacts, which determine investment environments. It could also be helpful to better calibrate and customise climate-related physical risk models needed to inform investment decisions going forward, to unlock public and private adaptation and resilience investments and to enhance the resilience of the EU’s economy and society to the unavoidable impacts of climate change.
Question 99. In your opinion, should the European Commission take action to enhance the availability, usability and comparability of climate-related loss and physical risk data across the EU?
Yes No Don’t know / no opinion / not relevant
Question 99.1 If yes, for which of the following type of data should the European Commission take action to enhance its availability, usability and comparability across the EU?
Please select as many options as you like.
Loss data Physical risk data
Please specify why you think the European Commission should take action to enhance the availability, usability and comparability of climate-related loss data across the EU?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
A key prerequisite for a well-functioning market is the availability of information. In order for financial
institutions to take into account environmental and climate-related risk, sufficient information on these risks
should be available, usable and comparable. Collecting and analyzing this information is costly, so it would
be efficient if these risks are communicated in a transparent and standardized way. We also see that the
market calls for action in this area. The European Commission should answer to this call and enhance the
availability, usability and comparability of climate-related loss and physical risk data across the EU for listed
companies and financial institutions. Both loss data and physical risk data are equally important in this.
Furthermore, it is also important to balance this ambition with the administrative burden for the corporate
institutions that have to provide the information.
Please specify why you think the European Commission should take action to enhance the availability, usability and comparability of climate-related physical risk data across the EU?
2000 character(s) maximum including spaces and line breaks, i.e. stricter than the MS Word characters counting method.
Financial management of physical risk
According to a report by the European Environmental Agency, during the period of 1980-2017 , 65% of direct economic losses from climate disasters were not covered by insurance in EU and EFTA countries, with wide discrepancies between Member States, hazards and types of policyholders. The availability and affordability of natural catastrophe financial risk management tools differs widely across the EU, also due to different choices and cultural preferences with regards to ex-ante and ex-post financial management in case of disasters. While the financial industry (and in particular the insurance sector) can play a leading role in managing the financial risk arising from adverse climate impacts by absorbing losses and promoting resilience, EIOPA has warned that insurability is likely to become an increasing concern . Measures to maintain and broaden risk transfer mechanisms might hence require (potentially temporary) public policy solutions.
Furthermore, the ongoing COVID-19 outbreak is highlighting the growing risk arising from pandemics in particular, which will become more frequent with the reduction of biodiversity and wildlife habitat. UNEP’s Frontiers 2016 Report on Emerging Issues of Environment Concern shows that such diseases can threaten economic development.
In this context, social and catastrophe bonds could play a crucial role: the former to orient use of proceeds towards the health system (e.g. IFFIM first vaccine bond issued in 2006), and the latter to broaden the financing options that are available to insurers when it comes to catastrophe reinsurance. Such instruments would help mobilise the broadest possible range of private finance alongside public budgets to contribute to the resilience of the EU’s health and economic systems, via prevention and reinsurance.
Question 100. Is there a role for the EU to promote more equal access to climate-related financial risk management mechanisms for businesses and citizens across the EU?
Yes No Don’t know / no opinion / not relevant
Question 101. Specifically with regards to the insurability of climate-related risks, do you see a role for the EU in this area?
Yes No Don’t know / no opinion / not relevant
Question 102. In your view, should investors and / or credit institutions, when they provide financing, be required to carry out an assessment of the potential long-term environmental and climate risks on the project, economic activity, or other assets?
Yes No Don’t know / no opinion / not relevant
Additional information
Should you wish to provide additional information (e.g. a position paper, report) or raise specific points not covered by the questionnaire, you can upload your additional document(s) here.
Please be aware that such additional information will not be considered if the questionnaire is left completely empty.
The maximum file size is 1 MB. You can upload several files.
Only files of the type pdf,txt,doc,docx,odt,rtf are allowed
57f5f71a-8fd9-40fd-b60b-16f3bb4f9369 /Kamerbrief_kabinetsreactie_initiatiefnota_verduurzaming_financiele_sector_juli_2020.pdf 8885de12-c658-4a66-b3c9-0a5165858464 /Kamerbrief_verkenning_markt_groene_financiering_augustus_2019.pdf
Useful links
More on this consultation (https://ec.europa.eu/info/publications/finance-consultations-2020-sustainable-financestrategy_en)
Consultation document (https://ec.europa.eu/info/files/2020-sustainable-finance-strategy-consultation-document_en) More on sustainable finance (https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainablefinance_en)
Specific privacy statement (https://ec.europa.eu/info/files/2020-sustainable-finance-strategy-specific-privacystatement_en)
Contact
fisma-sf-consultation@ec.europa.eu