On 24 May 2018, the European Commission announced the publication of a package of reforms relating to sustainable finance. Full details of the many documents published are given on this Commission webpage and a set of frequently asked questions has also been published.
The Commission is proposing measures to:
- provide clarity on what sustainable investments are by creating an EU-wide classification system or taxonomy to provide businesses and investors with a common language to identify what degree economic activities can be considered environmentally-sustainable;
- ensure that asset managers, institutional investors, insurance distributors and investment advisors include economic, social and governance factors in their investment decisions and advisory processes as part of their duty to act in the best interest of investors or beneficiaries. Asset managers and institutional investors who claim to pursue sustainability objectives would have to disclose how their investments are aligned with those objectives;
- create a new benchmark category for low-carbon and positive-carbon impact benchmarks, fostering a generally accepted market standard to measure a company's footprint and, in consequence, an investment portfolio's carbon footprint;
- ensure that investment firms and insurance distributors integrate sustainability preferences into their suitability tests when offering advice to investors and that the products offered meet their clients' needs.