The Action Plan for Sustainable Growth was adopted by the European Commission in 2018 and has three main goals: reorienting capital flows towards a more sustainable economy, mainstreaming sustainability into risk management and fostering transparency and long-termism. It is part of the EU Green Deal, which aims to make the continent net zero by 2050.
As part of the Action Plan, several pieces of legislation have been passed that impact financial actors, including the EU Sustainable Finance Disclosure Regulations (SFDR), the EU Taxonomy Regulation (TR) the EU Market in Financial Instruments Sustainable Preference obligation (MiFID II) and the Benchmark Regulation (BMR).
These regulations aim to standardize the disclosure of information regarding the sustainability profile of investment products in order to provide more transparency to investors. This allows clients to better understand and compare the sustainability profile of products, which helps investors make decisions aligned with their investing goals and reorient capital flows into investment products that support a more sustainable economy.
Exhibit: Sustainable Finance Regulation under the EU Action Plan
Source: Pohlmann & Company. ESG – EU sets new compliance rules for a sustainable economy. May 2021.
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