“A sustainable economy, low-carbon, resource-efficient, resilient and more competitive on the global stage”, EU Commissioner Vella in a Sting Exclusive

EU Commissioner Vella 2018.jpg

(EU Commission, 2018)

EU Commissioner Vella’s exclusive opinion editorial is published in response to the United Nations Under-Secretary-General Erik Solheim’s cutting-edge article on renewable energy investment and sustainable finance exclusively published at The Sting on 13 April 2018. The opinions expressed in this Sting Exclusive belong to the EU Commissioner.

Environmental risks to the economy cannot be ignored. The 2018 annual Global Risks Report of the World Economic Forum shows that 5 of the top 10 most likely risks are either environmental, or directly linked to environmental degradation.

Extreme weather events, climate change, man-made environmental disasters, water and food crises, and biodiversity loss all pose threats.

What we need to do is convert these warnings, this risk, into opportunity. It’s about environmental challenges creating economic opportunities.

I am convinced that we can and we should ‘scale-up’ business opportunities by channelling finance and investment towards activities that deliver environmental benefits and not environmental degradation.

This is what we mean by sustainable finance and sustainable investment.

The European Commission has long recognised that a healthy environment goes hand in hand with economic growth and jobs, and is an indispensable foundation for sustainable development.

Whether it is about water-related risks such as flooding and droughts, or stranded assets from biodiversity loss (e.g. in agriculture), it is clear that not addressing environmental risks threatens the stability of financial markets.

The environment is not a barrier to economic development. On the contrary, there is no successful, durable and competitive economic model if it is not sustainable.

Failing to address natural capital degradation poses risks not only to our health and the environment, but also to long-term economic growth, as well as to political and financial stability.

The transition to a low-carbon, resource-efficient and circular economy offers significant investment opportunities.

Action Plan on Sustainable Finance

Finance will be a major enabler of the transition towards a green economy. At the same time, the EU financial system itself will become more robust and stable as it integrates environmental, social and governance (ESG) considerations.

The European Commission has recognised the need for a large-scale effort to transform our financial framework, redirecting capital towards sustainable activities.

The Commission adopted an EU Action Plan on “Financing Sustainable Growth” on 8 March.

One of the first steps in implementing the Action Plan will be to develop an EU taxonomy – or a classification system – for sustainable finance, providing clarity on what is green and what is not.

We will also develop standards and labels for green financial products, notably by exploring the use of the EU Ecolabel framework to create a voluntary EU-wide labelling scheme for certain financial products. This will enable retail investors to put their money in sustainable projects.

Environmental Accounting standards will need to be developed too, so that information on the environmental performance of companies and projects – and its impact on financial performance – can be integrated into decision-making by investors.

To incentivise the financing of sustainable activities, the Commission is looking positively at the European Parliament’s proposal to amend capital charges for banks by introducing a so-called green supporting factor.

A ‘green supporting factor’ would mean banks need to hold less capital when making green investments because those investments would be considered as a lower risk-weighted asset (RWA).

However, implementation of such a system requires evidence that green investments indeed carry lower degree of risk, and probably substantial changes in banks’ risk management and supervision.

Finally, the Commission will propose amendments to existing legislation to clarify investor duties. This is to ensure that asset managers, pension funds and insurance companies consider environmental, social and governance (ESG) factors and risks in their investment decision process, and are more transparent towards end-client.

For example, ecosystems on land and in water absorb around half of man-made CO2 emissions; deforestation and forest degradation account for around 12% of these emissions; water is an energy intensive commodity [abstraction, transportation, treatment, heating], so water efficiency also means energy savings; fighting air and water pollution are also key determinants of more “social” SDGs, such as health, poverty and hunger.

EU Funds

Of course, it is not about substituting public finance with private capital; rather it is about getting both to work together towards sustainability.

EU funds, for example, also have a role to play. We are gradually integrating environmental objectives into all relevant major EU funds, and are assessing the possibility of continuing with this approach in the future.

There is a need for increased policy coherence, in particular concerning the Common Agricultural Policy and Cohesion policy, with the LIFE programme helping to reinforce environmental integration.

This direction will take us to a sustainable economy, low-carbon, resource-efficient, resilient and more competitive on the global stage: an economy that citizens really want. One that protects businesses that allows for the production and consumption of goods and services in more efficient ways. One that creates local jobs at all skill levels, and doesn’t harm the natural world upon which we depend.

Getting to that economy is a challenge that requires parallel action on several fronts and coordinated efforts. But it is also an opportunity for many to engage, including financial intermediaries, institutional and retail investors, supervisors and policy makers.

About the author

Karmenu Vella is the European Commissioner for Environment, Maritime Affairs and Fisheries. He was born in Malta on June 1950. Mr Vella graduated in Architecture and Civil Engineering, and later obtained a Master of Science in Tourism Management from University of Sheffield. He was first elected to Parliament in 1976 and continued to be was re-elected in the elections that followed for nine consecutive times. During his political career he has been appointed Minister for Public Works, Minister for Industry and Minister for Tourism twice. Mr Vella had also held various senior posts in the private sector.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Migrants and refugees face higher risk of developing ill-health, says UN report on displaced people in Europe

LGBT community in Chechnya faces ‘new wave of persecution’: UN human rights experts

Impressions of China

Not much of a help the new EU Directive on pensions

Protests, violence in Haiti prompts international call for ‘realistic and lasting solutions’ to crisis

Welfare of transported animals: MEPs urge EU states to do a better job

Commission supports normalisation in Greece through activation of post-programme framework

Worldwide UN family celebrates enduring universal values of human rights

Tunisia wants to change inheritance rules to boost gender equality

Planet’s Health is Our Health and the Reverse is True

Scientists in Sweden are studying the climate-cooling effects of spruce forests

The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

This is the life of a refugee: the constant destruction and construction of dreams every day

‘Comprehensively include migrants’ or sustainable development won’t happen, warns General Assembly President

5 things you need to know about your microbiome

We need greater protection for our oceans. We can’t let politics stand in the way

COP24: Paris agreement remained alive but fragile while the EU attempts to slow down CO2 emissions for new cars

As tech disrupts our jobs, it’s not too late to turn pain into gain

MEPs spell out priorities for the European Central Bank and on banking union

EU and China seize momentum to enhance trade agreements in response to Trump’s administration

99 per cent of intravenous drug users lack access to health, ‘social services with dignity’ says UNAIDS chief

Here’s how we get businesses to harmonize on climate change

FROM THE FIELD: Powering up health care in Sub-Saharan Africa

Bureaucracy in the member states again the obstacle for long due strong European Hedge Funds

New identity cards deliver recognition and protection for Rohingya refugees in Bangladesh

Russia must urgently step up fight against foreign bribery

South Korea once recycled 2% of its food waste. Now it recycles 95%

Fair completion rules and the law of gravity don’t apply to banks

Only a few months away from the single European patent space

Why home is the least safe place to be a woman

Achieving targets on energy helps meet other Global Goals, UN forum told

Are e-cigarettes as safe as they claim to be?

UN rights chief calls for international inquiry into Kashmir violations

UN postal agency ‘regrets’ US withdrawal

UN global counter-terrorism strategy review an ‘overarching vision for the future’: Assembly President

Social inclusion: how much should young people hope from the EU? 

A Sting Exclusive, the European Commissioner for Energy Günther Oettinger writes for the Sting on “EU Industry: a major energizer”

May threatens the EU with a wild Brexit indifferent to Scotland, Northern Ireland and the City

VW emissions scandal: EU unable to protect its consumers against large multinationals

Cape Town’s crisis shows us the real cost of water

Not enough resettlement solutions for refugees worldwide, says UN

Towards a seamless internal EU market for industrial goods

Is poor generational intelligence holding you back at work?

My ‘’cultural’’ contacts with China

The Government of China and UNIDO partner to develop technical guidelines for standards of small hydropower development

Pakistan’s digital revolution is happening faster than you think

EU and African leaders to jointly tackle the migration crisis across the Mediterranean

Cybersecurity needs a holistic approach. Here are three ways to build protection

Global Citizen-Volunteer Internships

The four top Americans who flew to Europe perplexed things about Trump’s intentions

Financial transactions tax gets go ahead

How big data can help us fight climate change faster

UN chief welcomes resolution to 27-year-old disagreement over renaming the former Yugoslav Republic of Macedonia

This plastic-free bag dissolves in water

Food system failures in our age of abundance

In Libya, Guterres ‘deeply concerned’ by risk of fresh military confrontation, urges restraint

The strong version of the EU banking union gains momentum

Syria: WHO appeals for funding to sustain critical health care for millions trapped by conflict

‘We need to do more’ to transform the world, deputy UN chief tells African audiences

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s