The clock is ticking on the EU sustainable action plan: 140 days to save the world?

Why 2019 will be a pivotal year for all sorts of reasons

The European Union’s push on sustainable investment is up against something not even a backroom EU powerbroker can control: time.

That’s because the effective deadline for the European Commission to push through its Action Plan on sustainable finance is just before Easter next year.

April 18, the day before Good Friday, is the date of the final session of the current European Parliament. That’s just 140 working days from now at an institution not noted for nimbleness.

Then there’s the European Parliamentary elections over May 23-26 with the new Parliament starting back up again on July 2. The composition of the new Parliament is anybody’s guess.

Granted, it’s the executive arm of the EU, the Commission, that is behind the Action Plan – but everything has to be signed off by the Parliament, which is also involved in the murky ‘trialogue’ process with the Commission and the member state-level European Council, where draft legislation is wrangled into a compromise form.

But the Commission itself is running out of road.

The current administration, headed by Jean-Claude Juncker, ends its term on October 31 next year: just 277 working days away.

The previous Commission under Manuel Barroso enacted dozens of measures in what now seems to be a frantic attempt to close the stable door after the financial crisis.

Observers worry that the current powers-that-be are engaged in a similar ‘legislate in haste, repent at leisure’ exercise in terms of sustainable finance.

It’s not just the current commission that comes to the end of its term at the end of October as the nights draw in. European Central Bank Chairman Mario Draghi’s term is up as well.

Still, there will be one anchor of stability at the top of the European institutions: Donald Tusk will still be at the helm of the European Council.

But wait. He’ll be there for just another month – his term ends on November 30! So it’s change across the board in Europe.

One small detail we’ve avoided so far: Brexit on March 29.It might as well be a few days later as far as we are concerned: April Fool’s Day. But that notwithstanding, it’s a symptom of an unpredictable new political situation at the European institutions and an unforeseeable power dynamic.

Deadlines, deadlines: the Action Plan
The urgency is reflected in the slew of deadlines in the EU’s Action Plan on Financing Sustainable Growth that land in the first two quarters of next year.

The first iteration of the green taxonomy is due by the end of the first quarter and will focus on climate mitigation; but after that, the Technical Expert Group (TEG) driving it will have just three months to broaden it to cover adaptation and other environmental activities too.

The TEG has the same deadline to prepare a report on an EU green bond standard… and to publish a report on the design and methodology of a low-carbon benchmark definition.

By the first quarter, the European Supervisory Authorities are all expected to present evidence of “undue short-term pressure” on companies. The European Securities and Markets Authority (ESMA) has until the second quarter to assess the credit rating market’s approach to ESG and include sustainability information in its disclosure guidelines, while the Commission has pledged over the same period to carry out a study on sustainability ratings and research.

It will also revise guidelines on non-financial information, according to its plans, and complete a review of whether corporate boards should be required to develop sustainability strategies, and clarify the responsibility of directors on long-term thinking. It will publish the conclusions of a ‘fitness check’ on public corporate reporting by the end of the second quarter, too. By the third quarter – the latest of its Action Plan deadlines – the Commission will report on its progress on updating Credit Ratings Agency Regulation to mandate sustainability.

How all this will get through the EU regulatory process – especially in the face of strong market opposition – will be a huge challenge and it makes the absence of the asset owner voice all the more regrettable.