First look at the new sustainable finance strategy
In my previous post, we were counting down to the Renewed Sustainable Finance Strategy and reflecting on some of the main challenges and opportunities it could address. On July 6th, the Strategy was finally presented – and while many of our points have been recognized, there are many additional elements that are reflected in the proposal.
What´s in a name?
The rationale of the strategy has remained the same, with the main aim being to bridge the goals of the 2018 Action Plan Financing Sustainable Growth, the European Green Deal and the new COVID-19 reality. On the other hand, what can be noted at a first glance is the name: from the initial Renewed Sustainable Finance Strategy that sounded destination-focused, today´s title is Strategy for Financing the Transition to a Sustainable Economy, which sounds journey-focused and brings a different narrative to the discussions. Indeed, a little or a lot can be attributed to a name.
Main building blocks
The Strategy identifies four main areas where additional actions are needed to support the transition to a sustainable economy. Each of these areas seems to have a particular range of stakeholders in mind: financing the transition to sustainability refers to actions aimed at the economy as a whole; inclusive sustainable finance framework aims at local-level actors and adds social and digital aspects to the discussion; financial sector resilience accesses the efforts from the financial sector; and fostering global ambition speaks about international cooperation. Together, these focus areas elaborate on six comprehensive actions, whose progress will be reviewed by the end of 2023.
Many developments will stem from the Strategy, as stand-alone actions or in conjunction with upcoming legislative reviews and current action plans. Some of the key ones include:
– Increased focus on individuals, households and SMEs in terms of their access to finance and facilitated reporting practices for SMEs. Here the unprecedented role of sound, personal financial advice is and will be crucial. The uptake of digital technologies should support and not replace this process. Furthermore, financial and digital inclusion need to be top of mind considerations, as no one should be left behind or without an opportunity to contribute to the wider cause of sustainability.
– Competence – the Commission aims to, depending on the review processes with key files, to possibly look for improvements in the level of sustainability expertise of financial advisers. Here it is important to consider the existing systems and legislation in place as well as national developments – for example, training or certification programs developed together with financial trade unions.
– Reinforced commitment to deliver a report on expanding the scope of the Taxonomy to include social objectives – we join many stakeholders in expressing support for the necessary steps leading to a full social taxonomy soon. We are also pleased that the need to review the disclosure rules has been lifted, for better alignment with the upcoming social objectives and more.
– Financial sector-specific activities, particularly double-materiality could lead to strengthening of social dialogue, actively including employees in sustainable finance and also increasing the focus on human and labor rights across the value chains. The integration of sustainability risk should also be done carefully and considering social and employment effects.
– Recognizing transition activities in addition to activities that significantly contribute, significantly harm and do not significantly harm the environment would bring a more complete picture. The challenge to is to ensure that the ambition stays high, efforts science-based, and that social safeguards are considered all the way.
– Greening the budget has been lifted as one of the efforts directed towards member states. It is crucial that these efforts go beyond green and include social considerations. A broad social perspective review is already part of the process in some of the countries used as reference.
As the further analysis of the strategy and its actions will continue, so does NFU´s role in lifting employees and trade unions as catalysts in the sustainable finance agenda. With that in mind, we expect that the European Commission will leave space for employees and their representatives in all discussion and policy forums related to the new Strategy. We also look forward to the steps leading to a social taxonomy – this is part of the ´inclusion´ segment in the Strategy but in fact it is the next step to a holistic view of sustainable finance.
Head of EU Affairs at NFU