Sustainable Finance Regulation Package: AFME Approval

The Association for Financial Markets in Europe (AFME) has expressed its support for the European Commission's recently published Sustainable Finance package. This package contains a legislative proposal for the regulation of Environmental, Social, and Governance (ESG) ratings providers, aiming to enhance transparency, integrity, and quality of ESG ratings. The package also includes the final Delegated Act for additional environmental criteria and expansions to the EU Taxonomy, a communication taking stock of progress in the EU sustainable finance regulatory framework, and a staff working document on the usability of the EU Taxonomy. Moreover, the package contains a recommendation on transition finance, which emphasizes its crucial role in meeting the EU's climate and environmental goals. Overall, the package is focused on helping market participants implement the EU Taxonomy and enhance its usability, with a strong emphasis on transparency.

Sustainable Finance: Embracing Regulatory Changes

The European Commission's Sustainable Finance package, supported by the Association for Financial Markets in Europe (AFME), brings forth a comprehensive framework that will reshape the landscape of sustainable and transition finance in the EU. This package encompasses a range of regulations, proposals, and communications designed to enhance transparency, integrity, and quality in the field of Environmental, Social, and Governance (ESG) ratings.

At its core, the package recognizes the urgent need to address climate change and environmental challenges. By introducing a legislative proposal for the regulation of ESG ratings providers, the European Commission aims to instill higher standards and greater regulatory oversight. This measure will have a significant impact on financial institutions involved in sustainable finance and ESG ratings providers. Stricter reporting and disclosure obligations will lead to increased transparency, ensuring that ESG ratings are more reliable and trustworthy. Consequently, investor confidence in sustainable investments will be strengthened, fostering the growth of the sustainable finance market.

Furthermore, the package expands the EU Taxonomy by introducing additional environmental criteria through the final Delegated Act. This expansion aims to streamline the implementation and usability of the EU Taxonomy, making it easier for market participants to navigate and comprehend. By providing a clear framework for identifying environmentally sustainable economic activities, the EU Taxonomy empowers financial institutions and market participants to allocate capital towards projects that align with the EU's environmental objectives. This harmonization of standards and criteria will facilitate a more efficient and effective allocation of resources, accelerating the transition towards a greener and more sustainable economy.

In recognizing the importance of transition finance, the package also includes a recommendation on this topic. Transition finance plays a pivotal role in supporting sectors and industries as they undergo the necessary transformation towards sustainability. The European Commission's guidance on utilizing sustainable finance tools and disclosures for transition finance encourages investments in projects that contribute to the EU's climate goals, even if they are not yet fully sustainable. This recognition highlights the Commission's commitment to facilitating a smooth and inclusive transition, ensuring that no sector or industry is left behind in the pursuit of environmental objectives.

The package also emphasizes the importance of addressing usability and implementation challenges within the sustainable finance regulatory framework. The communication on progress in the EU sustainable finance regulatory framework and the staff working document on the usability of the EU Taxonomy both underline the need for practical application and effective implementation. By actively seeking to improve the usability of the EU Taxonomy and addressing implementation challenges, the European Commission aims to ensure that the regulatory framework is efficient, coherent, and supportive of sustainable economic growth.

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AFME welcomes the Sustainable Finance package recently published by the European Commission | AFME

The Association for Financial Markets in Europe (AFME) is the voice of Europe’s wholesale financial markets. We represent the leading global and European banks and other significant capital market players.

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