EU sustainable finance action plan: state of play – Amundi

ESG Thema, 11.

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... Key findings:
  • The need to mobilise capital to fast track the transition to a more equitable, carbon-neutral economy has never been so acute, and the EU sustainable finance action plan (the 'action plan'), launched as part of the European green deal, has never been more timely and relevant, notably in the light of the recently launched RePowerEU.
  • The action plan will probably have long-lasting impact on EU capital market and play a critical role in supporting the development of more sustainable capital markets. But to fully apprehend the magnitude of the impact of the action plan, one cannot simply look at its different component as standalone legislation independent from one another. The key building blocks are all interconnected, and one needs to analyse each and every pillar to come to grasp with the ambition of the action plan.
  • The implementation of the Action Plan raises numerous challenges for investors that are proportionate to the level of ambition set by the regulators:
    • First, a structural and operational challenge, linked to the legislation’s complexity, granularity and level of prescriptiveness.
    • Second, specific challenges linked to inconsistencies in regulations’ implementations timelines.
    • Last, an interpretation challenge, which is today a source of great uncertainty in the market.
  • Other challenges have been identified, notably basing the transition pathways of economic actors fully on the dominant interpretation and application of some key regulatory definitions (such as 'sustainable investment').
  • Nevertheless, the implementation of the action plan has already had some positive impact on the development of sustainable finance, with financial market participants upgrading their policies and transparency standards to comply with the rules. Amundi expect to see a positive impact in the medium and long run, even more so if the challenges mentioned above are addressed.
  • Sustainable finance is evolving from a niche to a standardised and regulated environment. At a time of elevated scrutiny on ESG and sustainable finance practices, the EU sustainable finance action plan should act as a beacon, furthering increased transparency and upgraded standards.

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