About
The March 2018 Action Plan on Financing Sustainable Growth includes different types of measures, both legislative and non-legislative, the overall objectives of which are to:
- Reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth;
- manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues; and
- foster transparency and long-termism in financial and economic activity.
The Commission released in May 2018 its proposal for a first legislative package implementing several key actions announced in the Action Plan, and has since worked rigorously in finalising such first initiatives as well as introducing new ones. By way of example, the Action Plan has resulted in the following pieces of level 1 legislation:
- The Regulation on the establishment of a unified EU classification system on what can be considered an environmentally sustainable economic activity (the EU Taxonomy);
- the Sustainability Finance Disclosure Regulation setting out sustainability-related transparency requirements on financial market participants (such as asset managers) and financial advisers (the SFDR); and
- The European Green Bond Standard framework setting out a voluntary standard closely linked to the Taxonomy Regulation (the EU Green Bond Standard).
The EU Taxonomy and the SFDR have been applicable in the EU since 1 January 2022 and 10 March 2021, respectively. Both frameworks are implemented in Norwegian law. The EU Green Bond standard entered into force in the EU 20 December 2023 and will applicable for issuers from 21 December 2024. The Norwegian implementation is in process.
In addition to the level 1 legislation, amendments to detailed level 2 requirements under MiFID II, IDD, the UCITS Directive and AIFMD have been adopted as part of the initiatives.
The renewed action plan announced in 2021 is named "Strategy for financing the transition to a sustainable economy", underpinning the focus on transition finance as one of four main areas of the renewed strategy. In respect of the transitional finance area, the Commission will take actions to:
- Support financing certain economic activities contributing to reducing greenhouse gas emission;
- consider options for a possible extension of the EU Taxonomy framework to recognise transition efforts;
- include additional sustainable activities in the EU Taxonomy; and
- extend sustainable finance standards and labels that support financing the transition to sustainability and phased transition efforts.
The other actions under the renewed strategy relate to a more inclusive sustainable finance framework, improving the financial sector's resilience and contribution to sustainability and fostering global ambition.
The actions are set out in more detail in the Commission's communication.
Who does it impact?
- EU Member States
- Financial market participants by e.g. imposing requirements on disclosure and reporting, as well as establishing an EU classification system on sustainable finance (EU Taxonomy).
Status: Launched
- The Action Plan itself was released by the European Commission in March 2018.
- A renewed strategy was announced in July 2021.
Relation to other initiatives and regulations
The European Commission's Action Plan on Financing Sustainable Growth and the renewed Strategy for financing the transition to a sustainable economy constitute the main framework on the EU's work on sustainable finance.
In order to achieve the strategic goals under the 2018 Action Plan and the renewed 2021 plan, several initiatives are finalised and/or are under development both politically and legally, addressing different aspects of sustainable finance.
Thommessen's comments
EU's action plan on sustainable finance is key to understanding coming legislative and non-legislative initiatives in the area of sustainable finance.
Among the initiatives under the action plan published in March 2018 were the establishment of the EU Taxonomy, the Sustainability Finance Disclosure Regulation (the 'SFDR') and the EU Green Bond Standard. The initiatives have been, and still are, widely discussed as they were expected to have, and have had, considerable impact on financial market participants, as well as financial and non-financial undertakings.
The Commission announced its renewed sustainable finance strategy in July 2021, focusing in particular on financing the transition to a sustainable economy.