EGD Sustainable Finance Strategy Consultation Now Available

Photo by Science in HD on Unsplash.

By Tom Carter, Senior Associate

The Green Recovery initiative in Europe is a confluence of implementation of the European Green Deal with recovery from the healthcare and economic crises imposed by the COVID-19 pandemic. In addition to specific targets to reduce the environmental footprint of human activities, these ambitious efforts must involve financing the measures required to build a sustainable economy and gathering more data on the impacts of current activities.

One key element of sustainable finance is ensuring that investment decisions are made with a full understanding of the environmental and social impacts of the activities being supported.

Below is a summary of European initiatives in the related fields of sustainable finance and non-financial reporting.

EU Action Plan on Sustainable Finance

The European Commission has proposed an action plan on sustainable finance, a key element of the European Green Deal (EGD), to augment public funds by channeling private investment to Europe’s transition to a sustainable, climate-neutral economy. It involves accounting for environmental and social considerations when making investment decisions, leading to increased investment in longer-term and sustainable activities. 

The European Commission adopted an action plan on sustainable finance in 2018, but the implementation of the plan will be conducted in the context of the European Green Deal. Specific related initiatives include:

• A consultation on renewed sustainable finance strategy

• The European Green Deal Investment Plan and Just Transition Mechanism

• The International Platform on Sustainable Finance, which extends to countries outside of Europe. 

Of course, all of these efforts will be developed and implemented in the context of recovery from the COVID-19 crisis, which will significantly increase investment opportunities across all sectors.

EU Consultation on Non-Financial Reporting

Non-financial reporting generally refers to corporate obligations to report information beyond the financial data typically required by governmental commerce, trade, and tax agencies. It is often used to specifically cover the social and environmental performance and impact of companies’ activities, supply chain, and products. While some corporations voluntarily report such information, the notion of non-financial reporting is often discussed in the context of proposed mandatory obligations. 

In 2014, the EU issued non-binding non-financial reporting obligations on large European companies addressing the following four areas:

• Environment

• Social and employee issues

• Human rights

• Bribery and corruption

But the European Commission has now initiated a consultation on possibly increasing the scope and applicability of those requirements as a means of implementing the European Green Deal and its sustainability goals. 

The Commission is requesting comments on the consultation strategy by June 11.

The information will be gathered through a questionnaire, which—along with a background document, is available here. After gathering the input of stakeholders, the Commission will consider whether and how to revise the 2014 Non-Financial Reporting Directive to cover more companies, require, more information, or become more binding and enforceable.

What does the EU Green Deal mean for business?

For more details about our perspective on the European Green Deal, check out Amplia Group’s four-part blog series on the EGD. Meet our Sustainability team, composed of experts in EU policy, sustainability, and marketing and public affairs.