The European Sustainable Investment Forum (Eurosif), is expecting the European Commission’s renewed sustainable finance strategy to be launched on 6 July, said Victor van Hoorn, Eurosif’s director, during a Swiss Sustainable Finance (SSF) market study virtual presentation yesterday.
The Commission will layout the policy programme for the period 2021-2024. Eurosif expects a “stronger focus on sustainability risks to the financial system”, on financial stability and institutions, prudential framework for insurance and pension funds and climate stress tests.
The revised strategy will also focus on transition finance, which will be an important aspect with regards to the move to carbon neutrality by 2050, he said.
“We may see something about labelling, a renewed focus on engagement, ESG rating and data providers, and on corporate reporting,” van Hoorn added.
Looking back, the implementation of the Sustainable Finance Disclosure Regulation (SFDR) has been challenging, van Hoorn said, but it has offered a new framework for the industry, with “transparency and comparability” being the two main drives of the legislation, he added.
“If I look at every single country in Europe, it is obvious that the SFDR is rapidly becoming a common language for the European sustainable investment market,” he said.
Eurosif perceives, however, that market participants are facing a series of challenges with regards to sustainable finance rules.
“Data availability and quality of investee companies remain a challenge [and] the second challenge relates to individual firms making decisions to how classify products,” van Hoorn said.
The risk is a fragmentation of the European market, with national regulators adopting “local guidance” to classify products, he explained, adding that discussions have been unfolding on this front in Germany and Spain, and other regulators may follow suit.
Eurosif expects over the summer to see the final technical standards on the SFDR that will spell out in more detail the requirements for market participants, he said.
“We may see some additional interpretative guidance for the classification of products and other elements of the legislation, and we understand that further down the line this year there may be some reflections on the adoption of guidance around marketing communication at the European level, because we have seen quite diverging styles of communicating about SFDR in the last couple of months,” he noted.
Eurosif also expects the other four objectives of the Taxonomy – including preventing pollution, protection of water, biodiversity and transition to circular economy – to be adopted in draft form by the end of this year.
The Taxonomy has received political pushbacks particularly in central and eastern Europe, and from a number of industries, he added.