First vice-president Frans Timmermans said: ‘Moving to a greener and more sustainable economy is good for job creation, good for people, and good for the planet. Today we are making sure that the financial system works towards this goal. Our proposals will allow investors and individual citizens to make a positive choice so that their money is used more responsibly and supports sustainability.’

A year ago, the Commission appointed a high-level expert group on sustainable finance to elaborate a comprehensive set of recommendations for the financial sector to support the transition to the low-carbon economy.

It is using the group’s recommendations to launch a roadmap for further work and upcoming actions covering all relevant actors in the financial system. These include establishing a common language for sustainable finance, ie, a unified EU classification system – or taxonomy – to define what is sustainable and identify areas where sustainable investment can make the biggest impact.

The plan is to create EU labels for green financial products on the basis of this EU classification system: this will allow investors to easily identify investments that comply with green or low-carbon criteria.

The Commission also wants to clarify the duty of asset managers and institutional investors to take sustainability into account in the investment process and enhance disclosure requirements, and to require insurance and investment firms to advise clients on the basis of their preferences on sustainability.

The Commission says it will explore the feasibility of recalibrating capital requirements for banks (the so-called green supporting factor) for sustainable investments, when it is justified from a risk perspective, while ensuring that financial stability is safeguarded.

It is also proposing to revise the guidelines on non-financial information to further align them with the recommendations of the Financial Stability Board's task force on climate-related financial disclosures (TCFD).

Report by Pat Sweet