sustainable investment

The guidelines, along with three new reports on green finance, demonstrate the European Commission’s intent in respect of meeting its Paris Agreement targets.

By Paul A. Davies, Michael D. Green and Clément Pradille

On June 18, 2019, the European Commission (Commission) published new guidelines on corporate climate-related information reporting, as well as three new reports by the Technical Expert Group on Sustainable Finance (TEG), as part of the Commission’s Sustainable Finance Action Plan (Action Plan). The new guidelines provide companies with information and recommendations to support their approach to reporting the impact of their activities on climate change, and also how climate change impacts the business of those companies.

Understanding the Guidelines

The Commission published its guidelines on reporting climate change-related information (2019 Guidelines) under the Non-Financial Reporting Directive 2014/95/EU (Directive). The 2019 Guidelines are part of the Action Plan, which was published in March 2018 and aims to reorient capital toward sustainable investment, manage financial risks arising from climate change, and foster transparency and a long-term view in financial and economic activities.

The Green Loan Principles may help sustainable investment growth

By Paul A. Davies and Aaron E. Franklin

The Loan Market Association and the Asia Pacific Loan Market Association recently announced the “Green Loan Principles” joint project. This two-page document, announced on March 21, 2018, seeks to stimulate the de minimis green loan market by following in the footsteps of the highly influential Green Bond Principles.

There have been green loans for several years, but this market has not experienced anywhere near the outstanding levels of growth of the green bond market. The reasons behind this are not clear, but, undeniably, green loans could be an effective alternative to green bonds in many cases. This could include when the amount to be borrowed would not suffice for a benchmark-sized bond, or if the borrower does not wish to comply with public reporting standards applicable to bond issuers. And although loans are far less public than widely distributed bonds, borrowers could still obtain many of the benefits associated with green bond issuance in terms of demonstrating to their stakeholders their commitment to these issues.

Recommendations signal a major shift for Europe’s financial system through both legislative and non-legislative changes.

By Paul A. Davies and Aaron E. Franklin

The European Commission (EC) has revealed its action plan for mobilizing the financial system to encourage a “greener and cleaner economy.”[1] The plan, which was released on 8 March, states that it aims to facilitate the following, in conjunction with the Paris Agreement and the EU’s sustainable development agenda: i) improvements in the financial system’s contributions to sustainable and inclusive growth, and ii) stronger financial stability by incorporating environmental, social, and governance (ESG) factors into investment decision-making. The inescapable takeaway is that the EC strongly encourages a more active regulatory role in the sustainable investments market, through both legislative and non-legislative changes.