Sustainable Financing and ESG Investment

The European Commission’s Action Plan on Financing Sustainable Growth, published in March 2018, sets out objectives and key actions to promote a re-orientation of private capital flows towards sustainable investments.

The Action Plan’s objectives are to:

• re-orient capital flows towards sustainable investment to achieve sustainable and inclusive growth
• manage financial risks stemming from climate change, natural disasters, environmental degradation and social issues, and
• foster transparency and long-termism in financial and economic activity.

To meet those objectives, the Commission has identified the following key actions:

• establish a common language for sustainable finance
• create standards and labels for green financial products
• clarify institutional investors' and asset managers' duties to ensure they consider ESG issues in their investment decision process
• incorporate sustainability in prudential requirements, and
• strengthen sustainability disclosure and improve accounting rule-making.

To further the Action Plan, the Commission has proposed three legislative initiatives of relevance to asset managers:

• a Regulation on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation)
• Regulation on sustainability‐related disclosures in the financial services sector ( the SFDR or Disclosure Regulation), and 
• delegated Regulations on suitability assessments, amending existing Level 2 measures for MiFID2 and the Insurance Distribution Directive.

We explain the background to the Action Plan and, for each legislative initiative, provide:

• links to the important documents and legal texts
• key industry responses to the initiatives, and
• a timeline showing what progress has been made, allowing you to plan ahead for implementing required changes