It highlights how the
banking sector is impacted and makes recommendations to further the
goal of developing sustainable finance in Europe.
The report provides analysis and identifies key milestones and
actions for the banking industry in the five key elements of the
European sustainable finance regulatory framework including:
- Sustainability reporting and disclosures;
- The development of taxonomies for sustainable activities;
- The development of market standards;
- Incorporation of ESG into banks’ risk management; and
- Initiatives relating to sustainable corporate governance.
Oliver Moullin, Managing Director for Sustainable Finance at AFME, said:
“Important progress has been made on the regulatory framework for
sustainable finance. As we heard at COP26, it is essential to get the
regulatory “plumbing” right to facilitate investments in support of
sustainability goals.
“The urgency of action has spurred an unprecedented number of
initiatives in a short space of time. This report provides a practical
guide for banks, helping them and their clients navigate the various
initiatives; and highlights recommendations in support of the crucial
goals of mobilising finance and ensuring the resilience of the financial
sector to climate-related risks.”
Vanessa Havard-Williams, global head of environment and climate change at Linklaters, added:
“Momentum is building globally on sustainable finance. Market
participants face both opportunities and challenges in navigating the
ever-evolving legal and regulatory framework. Having an understanding of
this shifting landscape and what actions should be taken, which we hope
this report provides, is key to keeping aligned with regulatory
expectations and bringing about change in the long-term.”
AFME assesses the current state of play of the European regulatory
framework and highlights three priority areas to facilitate the flow of
capital to help achieve sustainability objectives:
- Finalising effective foundations
Significant progress has been made over a short space of time, but it
is important to finalise and implement effective regulatory building
blocks as enablers of sustainable finance including (a) developing a
disclosure framework for sustainability reporting; (b) providing a
common classification system of sustainable economic activities; and (c)
ensuring that ESG risks are effectively integrated into banks’ risk
management. - Ensuring coherence and consistency
Due to the urgency of the task to tackle climate change, a very large
number of initiatives have been put in place in a short space of time.
While recognising the urgency of the task at hand, it is necessary to
ensure that the framework is coherent and consistent, particularly as
many aspects are complex and interconnected.
As the foundations are finalised, AFME calls on policymakers and
regulators to carefully consider the coherence of the framework as a
whole to ensure that it is meeting its goals of facilitating the
allocation of investment to meet sustainable objectives, avoids undue
complexity and overlapping, duplicative or inconsistent requirements.
Further enhancing the consistency, understanding and usability of the
framework would facilitate its implementation and help support
well-functioning sustainable finance markets.
- Strong international coordination
Climate change and other sustainability objectives are a global
challenge which necessitates an internationally coordinated response. In
order to maximise the benefits of sustainable finance, it is vital to
leverage international capital markets and to provide a coherent
approach for multinational businesses and financial institutions which
are key to supporting the transition.
AFME