John Rega, MLex takes us thorugh the recent comments from the EU on green finance.
"Green" investments could obtain a form of EU "branding" to establish their environmental or low-energy credentials, as policymakers seek to attract money managers to projects supporting the bloc's climate goals.
EU financial-services chief Valdis Dombrovskis said initiatives on "green finance" would be included in policies driving the bloc's capital markets union, intended to open up channels of business funding.
Speaking at a conference** in Paris, Dombrovskis said the European Commission is "working on reliable branding [for] what it means to actually be 'green.' We have to create a reliable system of [information] supply so that investors who are investing in green know that it is actually green."
Governments pledged in 2013 to spend 20 percent of the EU budget on "climate-related objectives" in the seven years ending on 31 December 2020. But the absence of any label or guidelines to show which projects help cut greenhouse-gas emissions and protect the environment has made it hard to know which financing is "green”.
Bank of England Governor Mark Carney, who chairs the Financial Stability Board, has estimated that $7 trillion in private-sector investments is needed to fund global carbon-reduction commitments in coming years. But industry officials say European investors are unlikely to step forward unless the EU provides detailed guidance.
The EU's efforts would complement the FSB's global push for more disclosure by companies about their climate-related risks, Dombrovskis said today.
"The expectation is to find the right tools and instruments to be sure that private-sector money goes into dealing with climate and environmental challenges," he said.
Dombrovskis didn't elaborate on whether he would seek a European label or other indicator for green funds and other investments, or whether the "initiatives" would take the form of legislation, recommendations or another type of policy. He also didn't specify the timing.
The capital markets union initiatives will also involve financial technology, Dombrovskis said, referring to digital innovations such as automated investment advice.
The commission is exploring fintech policy with a task force of staff members. They are looking at industry developments and work by national regulators, such as the UK Financial Conduct Authority's "regulatory sandbox" for companies to test products before marketing them.
"We need to have a cautious regulatory approach," he said, "not to regulate this industry to death before it even picks up."
Dombrovskis said the policy will aim to find the "right balance" between supporting novel services to benefit customers and guarding against risks.
"The more fintech companies are picking up, the more concerns there will be with regard to consumer protection," he said.
*Additional reporting by Emily Waterfield.
** "Capital Markets Summit 2017: How to Navigate the Post-Brexit Shakeup," held by Politico and l'Agefi, Paris, Feb. 23, 2017