The Commission also adopted yesteday a Delegated Act on the information to be disclosed by financial and non-financial companies about how sustainable their activities are, based on Article 8 of the EU Taxonomy.
Thus, EU took another major step towards achieving the goals in the Green Deal by ensuring a comprehensive approach to funding the green transition.
EU proposed incorporating climate-related risks into banks’ capital requirements. The challenge for lenders is weaning themselves off their lending exposure to fossil fuels. Their initial disclosures have been limited and commercial lenders still have “patchy” data regarding their exposure to climate change.
The ECB will hold a stress test next year to see how their balance sheets may fare as the climate and economy shifts. EU states will be asked to assess by June 2023 how their financial markets contribute to reaching the bloc’s climate goals. ECB will then calibrate the right pace for the transition by setting intermediate targets for the financial sector. Insurance capital rules may also be similarly amended.
The Commission confirmed it will publish taxonomy rules later this year for agriculture, certain industries and possibly nuclear and gas power plants. EU needed to guard against the risks associated with the transition, thus considering an “intermediate taxonomy” that would allow transition bonds.
The strategy seeks to empower individuals and the bloc’s 23 million SME by defining green loans and mortgages by 2022. New accounting rules may also be needed to “recognise and report” ESG risks in financial statements.
The strategy sets out a positive vision of the reform needed in the financial system to support the European economy.
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