Juncker Plan falls short of offering green projects, expert group says

European Commission Vice-President Valdis Dombrovskis said that an EU label for 'green' financial products is an idea with "great potential". [European Commission]

The high-level group on sustainable finance proposed on Tuesday (18 July) a new platform to match capital with green projects, as the Juncker Plan did not develop the ‘big pipeline’ that was expected to unlock the money resting in the pockets of big investors.

The chair of the European Commission High Level Expert Group on Sustainable Finance, Christian Thimann, stressed that “more can be done” in order to bring together investment and projects, as there is not a lack of money and needs.

Rather, it is an issue of “matchmaking”, he insisted.

To that end, the high-level group proposed setting up an organisation, with the tag ‘Sustainable infrastructure Europe’, to match investors with green infrastructure projects.

At a public hearing today, the 20-member group presented its interim report, including proposals to improve the financing of a sustainable European economy.

When the Commission launched the Juncker Plan, aka the Investment Plan for Europe, in November 2014, one of the main pillars was a project portal to channel financial resources in banks, pension funds and insurance companies toward large projects.

Benjamin Angel: 'Speed-dating' EU investment

The European Commission is getting ready to launch a “speed-dating” website that should help match investors with project promoters from all around Europe.

But this big pipeline is “still to be developed”, said Thimann, who is head of regulation, sustainability and insurance foresight at Axa, an insurance company.

The portal currently has 170 projects.

Investors agreed on the importance of having good projects to unlock money dormant on their books, not only in terms of good financial returns but also of solid green credentials.

More needs to be done to 'sell' Juncker Plan, confesses Katainen

The European Commission’s investment plan has been one of its biggest priorities this year. Now that the legal skeleton is in place, its political pilot, Vice-President Jyrki Katainen, recognised that he has to redouble efforts to ‘sell’ the package.

Guy Miller, chief market strategist at Zurich, another insurance group, said that the company is looking at environmental, social and governance issues as an “opportunity”.

But he added that definitions to what green or sustainable means are “still missing”.

In order to incentivise banks, insurers and pension funds to invest more in large infrastructure projects that could help the transition toward a low-carbon economy, the expert group recommended reviewing prudential rules in order to unleash more cash.

As part of the capital markets union review, the Commission announced that it will review in the second half of 2018 the prudential treatment of private equity and corporate debt for long-term investments.

Green finance reaches EU policy ‘tipping point’

The mid-term review of the EU’s Capital Markets Union initiative, due on Wednesday (7 June), will mark another step towards the mainstreaming of green finance in Europe, a senior EU official told EURACTIV.

‘Not fast enough’

Speaking at the same event, Commission Vice-President Valdis Dombrovskis said that green finance is “booming”. The value of green bonds issued in 2017 is predicted to reach €131 billion, up from €70 billion last year.

In 2015, over €300 billion was invested globally in the clean energy sector, six times more than a decade ago.

“We are moving in the right direction. But we are not moving fast enough,” he warned.

Dombrovskis said that a classification system for green assets, and European standards and a label for green financial products, including green bonds, have “great potential”.

The ‘Infrastructure Europe’ platform to match investors and projects and the new labelling system were part of the eight-point recommendation list made by the group.

The Commission also launched today a public consultation in order to gather stakeholder feedback on the report and policy recommendations.

The consultation will end on 20 September, and the high-level group will issue its final report by the end of this year based on the responses.

Financiers want climate risk integrated into EU’s Capital Markets Union

Investors managing over €13 trillion in assets have called on EU regulators to foster a financial system that better takes climate risk into account when the European Commission reviews its Capital Markets Union next year.

The group identified improving the assessment of long-term risks and intangible factors, including those related to ESG issues, as one of the key “imperatives”.

Common definitions, transparency and clear parameters on financial products valuation are also essential, as is being able to differentiate what is really green. But it remains an unmet goal

Dombrovskis highlighted that a common classification system and European standards and labels would provide “the confidence and trust” in green products needed to attract private money, in particular, from insurance companies and pension funds.

Positions

Flavia Micilotta, executive director of the European Sustainable Investment Forum (Eurosif), said: "When it comes to finding the right examples for a framework to define sustainable financial products, the Eurosif Transparency  Code stands as the best and most legitimate framework Europe has. Going forward, the Transparency Code could serve as a basis for the review of ESG aspects in the investment process."

Timeline

  • 20 September: end of the public consultation on the interim report's proposals on sustainable finance.
  • End of 2017: final report of the high-level group on sustainable finance.