The European Commission has published its Action Plan to boost the contribution of the financial industry to the aim of achieving a more sustainable global economy. The Plan is in line with BBVA’s 2025 Commitment, the Bank’s strategy on climate change and sustainability, which involves the mobilization of €100 billion over the next eight years to promote the transition toward a low-carbon economy and the sustainable development.
The fight against climate change is no longer a goal; it has become an urgent need. The devastation of the planet and the exhaustion of fossil-fuel energy sources make it necessary to adopt urgent measures for achieving a more sustainable model of development. That is what the European Union believes.
According to Frans Timmermans, First Vice-President of the European Commission, “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.”
But we are still very far from this goal. Indeed, according to the European Commission’s estimates, an additional total of €180 billion will have to be invested every year from now through 2030 to achieve the EU’s sustainable goals as set out in the historic Paris Climate Agreement. Above all, to reduce greenhouse gas emissions by 40%.
This is the background to the Action Plan for Sustainable Finance presented by the European Commission today. It adds to the efforts of the Capital Markets Union (CMU) to involve the financial industry in the aim of promoting sustainable development to the benefit of the planet and the people living on it.
The Action Plan published by Brussels includes the recommendations of the High-Level Expert Group (HLEG) on Sustainable Finance, which sets out a number of actions that involve the different actors operating in the financial system. Its main points are:
- Establish a common EU taxonomy to define what is and what is not sustainable, and identify the areas where sustainable investment can make the biggest impact.
- Creating EU labels for green financial products on the basis of this EU classification system: this will allow investors to easily identify investmetns that comply with green or low-carbon criteria.
- Clarifying the duty of asset managers and institutional investors to take sustainable criteria into account in their investment processes, as well as improving disclosure requirements.
- Require insurance companies and investment firms to include sustainability preferences in the advise they offer their clients.
- Incorporate sustainability into the prudential framework. The European Commission is exploring the possibility of introducing a “green supporting factor” for establishing capital requirements for banks, provided the factor is justified from the point of view of risks and financial stability.
- Increase transparency in corporate reports using as a reference the recommendations on climate change issued by the Financial Stability Board’s TCFD.
“At BBVA we value this Action Plan very positively. It represents a decisive step forward toward a more sustainable financial system geared to the needs of our society and of the planet. With this Plan, Europe takes the lead in the mobilization of the financial sector to fight against climate change and promote sustainable development,” explained Antoni Ballabriga, global head of sustainable development at BBVA.
BBVA’s 2025 Commitment
In line with the European Commission’s Action Plan on Sustainable Finance, BBVA has recently announced its 2025 Commitment, the Bank’s climate change and sustainable development strategy designed to make progress in the achievement of the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement.
This is an eight-year commitment (2018-2025) based on the three pillars of finance, management and commitment. BBVA undertakes to mobilize €100 billion in green and social finance, sustainable infrastructures and agribusiness, social entrepreneurship and financial inclusion.
In its commitment to manage environmental and social resources and minimize the potential direct and indirect negative impact, BBVA has set a target for 2025 that 70% of the energy used should be renewable, and to reduce direct CO2 emissions by 68% on the 2015 figure.
In addition, BBVA has agreed to involve all its stakeholders to boost the financial industry’s contribution to sustainable development.