The financial sector plays an essential role in financing the transition to a sustainable future. Incentivising investment in the transformation of companies should be prioritised and the overall policy framework needs to support such transitional pathways. The financial sector itself has many stakeholders who will assess whether a financial institution is contributing to the sustainable finance agenda and complying with corresponding rules.
In order to steer sustainable investments successfully, as well as to identify and manage sustainability risks correctly, the availability, high quality and comparability of sustainability data is essential. The tools to evaluate companies’ transition paths towards more sustainable activities are still work in progress at European level and at international level. Consistency and convergence is needed between the various standards under development. Policy actions should be balanced between the financial system and broader economic actors. The willingness and capacity of the financial sector to finance sustainable projects is significantly above the availability of suitable/bankable/investible assets. Therefore, a pipeline of sustainable investments is needed.
In order to improve resilience, governments should step up the protection against physical risk from climate change by means of insurance coverage and adaptation measures. For a clear understanding of physical risks, governments should promote investment in climate adaptation measures and support insurability, while establishing a voluntary public-private risk hub for granular data sharing of climate-related risks. Furthermore, governments should establish public-private partnerships to diversify risk through disaster funds.
In the attached Paper, the EFR asks attention for the fact that a consistent sustainable framework and the coordination of relevant tools is needed. The EFR Paper focuses on three areas, which are important to enable financial institutions in supporting the transition: 1) Taxonomy and transition pathways; 2) Standardised reporting obligations; and 3) Sustainability in prudential regulation.
The Members of EFR, Chairmen and Chief Executive Officers of international banks or insurers with headquarters in Europe, encourage the participants of the Conference of the Parties to engage in a constructive dialogue with the view to achieving a consensus on these crucial topics.