Launching a sustainable financial system in the European Union

Abstract

In the last years the European Union took a range of actions in line with the global efforts for creation of environmentally-sustainable financial system. This article reviews the Action Plan on Financing Sustainable Growth launched by the European Commission in 2018, its main features, new opportunities and challenges for major actors. As the analysis reveals - to create an EU-wide environmentally-sustainable classification system for financial products (EU taxonomy) it requires serious efforts to develop and conform technical details such as new categories of benchmarks and indicators. Respectively a staged approach is desired. From the other side, development of a unified taxonomy within a group of countries having a high level of integration with the possibility for EU authorities to implement the main targets into legislative initiatives, has more chances for success than at the global level. In the latter case we can expect for the near future only development of compatibility of criteria. Implementation of the Action Plan is partly laid on the EU intergovernmental financial institutions, but mainly it is placed on private ones. European banks, though being a key source of sustainable financing, cannot solely fulfill this task due to new banking regulations and serious internal problems in many of them. So involvement of institutional investors becomes more and more important as they are expected to create new class of financial assets. Approval of the Action Plan is an evidence of EU's ambition to keep its leading position in implementation of Sustainable development goals within the framework of the UN Agenda 2030. However, there are also many obstacles for growth of sustainable financing in the EU. To overcome them it requires coordinated efforts by all participants: EU-wide authorities, EU member-countries, private financial institutions, other investors and the civil society.