FESE welcomes the Commission’s renewed Sustainable Finance Strategy and its multiple planned actions to ensure that the financial system facilitates the transition of the economy towards sustainability.
We support developing a long-term sustainable finance vision that ensures a level playing field between public and private markets, is built on a solid understanding of the role of financial markets and how these can facilitate the transition towards a low-carbon future, and does not lead to unintended consequences for market players in terms of risk management.
With our firm commitment to contribute to the EU’s sustainable finance agenda, we would like to draw attention to certain aspects that are worth considering in the development and implementation of the Strategy:
- As we are transitioning to a more sustainable economy, it is important that companies’ best efforts are recognised and that companies which are implementing changes to become ESG compliant are not excluded from related initiatives or funding opportunities. In this regard, we would support the Commission’s suggestion to extend the EU Taxonomy framework to improve recognition of these transition efforts and mobilise investments for intermediary steps on a credible pathway towards sustainability.
- We need to foster sustainable finance across asset classes. For instance, ESG derivatives are increasingly playing a role in channelling more capital into sustainable investments, and hence should be considered under the regulatory frameworks in order to avoid fragmentation of and unintended negative effects within this market. Furthermore, it would also be important to avoid overlapping and diverging legislation, for example the upcoming benchmark-related regulation needs to be aligned with other sectoral legislation and developments in the underlying market.
- We should foster a more inclusive sustainable finance framework that provides SMEs with more financing opportunities and encourages retail investors’ participation in capital markets. Europe needs to empower retail investors by making investment practices simple, less costly, transparent, and by taking steps to prevent conflicts of interest. Similarly, with SMEs standing as the backbone and engine of the European economy, it is also vital to facilitate their access to more sustainable finance opportunities. For instance, under CSRD we would support a voluntary and proportionate sustainability reporting framework for all SMEs (whether they are listed or not) as this would create a level playing field and respond to investors’ demands. Likewise, we support measures that facilitate the sharing of company information and the provision of information to investors across Member States or regions. These would give companies visibility on a European basis.
- We also welcome the Commission’s proposal to provide advisory services for SMEs to report on sustainable-related information. Companies wishing to disclose ESG standards may face high compliance costs for their issuance of equity or bonds. Therefore, we would see merit in the Commission partially funding the advisory or compliance services needed by SMEs for the issuance of their assets, either in the form of a loan or via a rebate mechanism.
- In addition, FESE would appreciate specific EU incentives to facilitate access to finance for SMEs engaged in sustainable activities, or for those SMEs wishing to transition. These could include, inter alia, tax incentives for issuers, which could also be extended to investors in certain green instruments – such as the European Green Bonds – to boost demand.
- We believe that it is important to work on a global approach on the sustainable finance taxonomy, building on the EU framework and EU leadership within the field. There is the need for a robust international sustainable finance architecture that embraces the concept of double materiality. Moreover, we would suggest the creation, at EU level, of a transition alignment methodology for companies.
- Lastly, since different companies cannot be managed the same way, we support maintaining principles for corporate governance in the existing format of codes.