EU wants pension funds, asset managers for new high-level sustainable finance group

High Level Expert Group formed to set out sustainable finance road-map

The European Commission wants pension funds, insurers, asset managers and other finance players to join a new top-level group that has been tasked with developing a pan-European road-map for sustainable finance.

The new High Level Expert Group (HLEG) on sustainable finance will comprise up to 20 members with pension funds, insurers and other “operators of financial infrastructure” identified as a key group. The others are civil society NGOs and providers of analysis, data or methodologies “that facilitate sustainable or green finance”.

The new group will fit in with the EU’s Capital Markets Union plan to mobilise capital in Europe. “Sustainable investment is broadly understood as encompassing environmental, social and governance considerations in the investment process,” the Commission said.

A call for expressions of interest for the selection of the experts has been launched and the new group will be overseen by FISMA – the Commission’s Directorate General of Financial Stability, Financial Services and Capital Markets Union that is headed up by Vice-President Valdis Dombrovskis. Those interested in participating should apply by November 25; the group starts work next year with its first meeting set for January 24/25.

Dombrovskis, the former Latvian Prime Minister who took over the CMU brief when the UK’s Jonathan Hill resigned, noted how the EU is “pushing for a global transition towards a more sustainable economy”.

He went on: “The work we are doing on sustainable finance within the Capital Markets Union is part of this. We’ve made a start by supporting market initiatives such as green bonds. We’re looking at ways to encourage institutional investors to have more sustainable investment policies.

“We want to see what more can be done to support the transition to a low-carbon economy in the financial sector.”The new Expert Group would help shape this, he added. The new group will “take into account” other international work such as the G20 Green Finance Study Group and the Financial Stability Board’s Task Force on Climate-Related financial Disclosures.

The group’s mandate will be to set out the scale and dimensions of the challenges and opportunities of sustainable finance and recommend a “comprehensive programme of reforms” to the EU financial policy framework including “clear prioritisation and sequencing”.

“The group’s tasks shall be to help develop an overarching and comprehensive EU strategy on sustainable finance to integrate sustainability in EU financial policy,” the call for applications states.

The mandate of the group is to submit a “comprehensive policy road-map” with the Commission explicitly calling for “a coherent package” of “clear and operational” policy measures. Potential areas of focus could be corporate disclosures and the fiduciary obligations of investors.

The work will be in two phases. The first, lasting six months, will identify the most crucial segments of the sustainable finance market (e.g. green infrastructure, green bonds/ green loans and advisory services).

This phase will examine the risks for the EU financial system “due to its exposure to carbon-intensive assets” and look at ways to minimize risks of financial instability related to the low-carbon transition – for example “through stress-testing for the financial sector”. The interim report will be presented in June 2017 with a full report by the end of that year.

The new body follows the appointment of Hans Joachim Schellnhuber, director of the Potsdam Institute for Climate Impact Research (PIK), as chair of the new High Level Panel on Decarbonisation Pathways. Link