High level group sets the agenda
Earlier this year the EU high-level expert group on sustainable finance published its report ‘Financing a sustainable European economy’. The report focuses on a broad scope of measures, including a taxonomy for sustainable investments, development of EU-wide labels for financial products –starting with green bonds - and ensuring that non-financial objectives of beneficiaries are taken into account.
In addition it advises to clarify that ESG should be part of investor duties and to ensure appropriate time horizons for investment decisions. The upgrade of disclosure rules to make ESG risks and opportunities fully transparent is also identified as a key topic. All these elements have been taken on board in the Action Plan of the European Commission.
We see this Action Plan as an important building block for change towards a more sustainable economy. With regard to the financial sector as a whole we believe that indeed more transparency and a better level playing field are key. Better data and harmonized criteria for products like green bonds will deepen, professionalize and hopefully expand the market.
Furthermore, a high-quality taxonomy could encourage investors seeking positive impact. A taxonomy should be constantly evolving as is the market for green and social solutions. The clarification of investors duties around sustainability will increase attention towards environmental, social and governance aspects of investment across the board.
Just do it
Regarding our own ambitions regarding sustainable finance, we believe that this attention of policy makers and regulators does strengthen the case for our standing practice to integrate ESG factors in our investment decisions and extend time horizons for investments where possible. For our largest client PFZW we are currently implementing an impact investing program aiming for 20 billion euro impact investments in water, health, climate and food in 2020. In this impact investing program we are working with tailored taxonomies that reflect the preferences of the participants of PFZW. Furthermore, we are assisting PFZW in reducing the CO2 footprint of its equity portfolio by 50 percent in 2020.
In the coming months the European Commission will table legislative proposals on taxonomy as well as investor duties. Next year EU labels for green bonds are on the agenda. It goes without saying that PGGM is ready to take an active role. Our goal: a pragmatic and stimulating legal context that supports us in our goals for sustainable investing at low cost for PGGM, our clients and their beneficiaries.