The first legislation relating to an EU sustainable finance taxonomy will come as early as this spring, according to Commission vice president Valdis Dombrovskis, who said today (Friday) that a green bond label will be part of its action plan and a green supporting factor is still on the cards.
Dombrovskis, vice-president responsible for financial stability, financial services and Capital Markets Union (CMU), at the European Commission, made his remarks at a Brussels event to mark the handover of the final report of the High-Level Expert Group (HLEG) on sustainable finance. Such a taxonomy and the development of official green bond standards and ultimately a label were among priority HLEG recommendations in the report, published on Wednesday.
“First,” said Dombrovskis, “it is clear that we need a unified EU classification system – or taxonomy – for sustainable assets. This will help us define what is green and what is not green, and identify the areas where sustainable investment can make the biggest impact. This is fundamental for the development of any green finance policy.
“We will follow up this recommendation with the first piece of legislation in spring as regards the governance of this EU taxonomy.”
He also highlighted the need to further develop the green bond market.
“With a unified classification system in place, we intend to establish criteria and labels for green bonds and investment funds,” said Dombrovskis.
“These labels would help investors to easily identify financial products that comply with green or low carbon criteria.”
The expert group was ambivalent on the idea of lowering capital requirements for green assets through a so-called green supporting factor, but Dombrovskis reiterated the Commission’s interest in the concept – while acknowledging concerns noted in the HLEG report.
“We could boost green investments and loans by introducing a so-called green supporting factor,” he said. “This could be done at first stage by lowering capital requirements for certain climate-friendly investments, such as energy-efficient mortgages or low carbon cars.
“However, green does not mean risk-free. I believe that any measures would have to be carefully calibrated, and based on a clear EU classification.”
Dombrovskis said the Commission is reviewing other HLEG recommendations and how best to take them on board.
A conference on sustainable finance is being held by the Commission on 22 March in Brussels.
Photo: Dombrovskis and HLEG members; Source: @vdombrovskis/Twitter