ICMA commentary on the new EC sustainable finance strategy


15 July 2021 On 6 July 2021, the European Commission (EC) published its Strategy for Financing the Transition to a Sustainable Economy.

The International Capital Market Association (ICMA) supports the overall ambition and key objectives of the new strategy: (1) financing the transition, (2) inclusiveness, (3) financial sector resilience and contribution to the EU Green Deal target and (4) global ambition. ICMA agrees that the capital markets can help the EU deliver on these key objectives, especially through the growth and further development of sustainable finance that the strategy aims in turn to foster.

ICMA welcomes the strategy’s emphasis on transition that echoes the recommendations of the Transition Finance Report of the Commission’s Platform on Sustainable Finance of which ICMA is a member. We also strongly support the priority given to adopt a delegated act under the EU Taxonomy covering the remaining four environmental goals, i.e. water, biodiversity, pollution prevention and circular economy by Q2-2022.

We are concerned however that other initiatives relating to the Taxonomy focus essentially on widening its scope as a classification tool rather than enabling it as a transition financing resource. We caution that expanding the Taxonomy to defining economic activities that “do not have a significant impact on environmental sustainability” and to those “that significantly harm environmental sustainability” are unlikely to stimulate the supply of transition finance.

We comment on the proposed EU Green Bond Standard summarising the points we have made in a separate publication. We identify a risk of duplication of market initiatives in the strategy’s proposal to launch official labels for sustainability-linked or transition bonds. Conversely, we agree that European labels for sustainable fund products can address the emerging risk of fragmentation in this area in the EU.

We otherwise comment in this paper on other initiatives in the strategy relating to disclosures.

Generally, we set out below key points of attention that may require further consideration in order to effectively achieve the goals envisaged by the strategy.

We also provide in the annex an infographic summary of the new actions under the EU’s strategy highlighting the main areas of focus for ICMA.

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