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Sustainable finance

The European Union is fully committed to transform its economy and society and put it on a more sustainable path.

To fight climate change, the EU targets

  • to become the first carbon neutral continent by 2050
  • reduce by 55% its greenhouse gas emissions by 2030 as compared to 1990.

To meet the EU Green Deal's climate and environmental ambitious goals, it is estimated that an annual investment gap of approximately EUR 470 billion needs to be bridged.

Clearly, financing the EU Green Deal surpasses the capacity of national budgets alone.

Moreover, the EU is fully committed to mainstream social and governance considerations in investment strategies.

EU climate initiatives

In the context of sustainable finance, the Commission took several initiatives:

JRC science for policy support

In this context, JRC scientific and technical knowledge supports the development of several policy actions, including the following:

  • On the establishment of the EU list of environmentally sustainable economic activities, i.e. the EU taxonomy.
  • On the development of standards and labels. The JRC contributed to the work of the TEG on sustainable finance and its EU green bond standard subgroup and carried out analyses underlying the development of an EU Ecolabel for financial products by defining suitable criteria to identify the top environmentally performing products.
  • On strengthening the resilience of the financial system. The JRC is supporting the work of the European systemic risk board providing research input on the quantification of transition and physical risks related to climate change, including by providing data on natural disasters from the JRC risk data hub, as well as by developing models for climate stress-testing.
  • Findings of the related research have been published in various outlets including the JRC’s technical reports series and top academic journals and have fed into the policy making process.

How does the JRC support work on the EU taxonomy?

The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities.

The JRC has supported the technical expert group on sustainable finance (TEG) established in 2018. This includes

  • contributing to the EU Taxonomy’s key concepts and
  • methodology as well as to
  • developing technical screening criteria.

EU taxonomy climate delegated act

JRC recently played a central role in the Commission’s work in preparing the first delegated act on sustainable activities for climate change. THe JRC ensured that Taxonomy criteria are based on scientific evidence and a robust methodology.

The JRC developed the methodology for defining substantial contribution to climate change mitigation and published a report outlining it. JRC work has underpinned the impact assessment that accompanies the climate delegated act.

Platform on sustainable finance

In preparation for the work of the platform on sustainable finance, the JRC developed also the methodology for defining what “substantial contribution” to each of the remaining four environmental objectives and how to set out criteria accordingly. This is due to be published in the course of 2021.

Technical Working Group

The JRC also contributes to the coordination of the platform on sustainable finance. Our main involvement is in the subgroup called “Technical Working Group” (TWG), for which JRC is leading the technical secretariat.

The JRC works close togehter with a core group of commission departments:

Colleagues from those departments have each contributed with their knowledge and expertise towards a joint common product on a daily basis for over two years.

The TWG is in charge of developing and updating the technical screening criteria for the six environmental objectives as well as analysing requests from stakeholders about developing criteria for additional activities.

The Sevilla process - governance model to create legislation

JRC has been given this role because of our experience with managing expert groups towards consensus-building in similarly complex high-stake technical discussions capitalising on the so-called “Sevilla process”.

The “Sevilla process” is an innovative governance model to create legislation based on stakeholders’ engagement and underpinned by robust methodologies and sound scientific/technical information and data.

This process has already been implemented for the definitions of the best available techniques reference documents (BREFs) under the industrial emissions directive and other policies.

Experts from all across JRC have contributed in-depth unbiased technical expertise on almost all economic activities addressed so far.

How does the JRC support the EU Green Bond Standard

After the exponential growth experienced in recent years, green bonds are considered the star of sustainable capital markets, and likely to remain so for the years to come. The European Union is having a leading role in bridging the investment gap to meet the EU Green Deal's climate and environmental goals. This requires mobilising an unprecedented amount of resources and deploying adequate financial instruments.

What role do green bonds play?

The Commission seeks to raise 30% of Next Generation EU – the recovery instrument worth €750 billion – through the issuance of green bonds and to use the proceeds to finance green policies. European Commission President Ursula von der Leyen voiced this ambition in her 2020 State of the European Union speech. At the same time, the Commission proposal for an EU Green Bond Standard aims to enhance the transparency, comparability and credibility of the green bond market for both borrowers and investors, and, ultimately, to foster its growth.

JRC contributions to policy

In its work in support to policy, the JRC has developed extensive knowledge and expertise on green bonds and the green bond market. Examples of JRC scientific contributions include:

  • analysis of pricing on primary markets, which shows that green bonds can be a cheaper source of finance than conventional bonds for companies and governmental issuers;
  • assessment of the effectiveness against climate change, according to which green bond financing is proving effective in promoting more sustainable, less carbon-intensive activities;
  • Investigation of bond portfolios held by institutional investors, which documents that green bonds were more resilient than conventional bonds during the COVID-19 outbreak.

In addition to developing original research that fills important knowledge gaps in the academic literature, the JRC also monitors green bond issuances in the EU member states, including by governments, to assess how debt capital markets are contributing to financing the green transition.

Promoting interaction between science, policy, and private sector

Finally, the JRC promotes the interaction among policymakers, the scientific community and private-sector experts active in the field of sustainable finance. For this purpose, the JRC has organized events such as the academic conference on “promoting sustainable finance” and a joint workshop with the European Banking Authority on "banking regulation and sustainability".

Summer school on Sustainable finance

The JRC also organises a summer school on sustainable finance. The material from its 4th edition, which will be held during 7-8 July 2022, as well as from the first ,the second and the third editions can be found in the respective links.

Related Documents

List of JRC Sustainable Finance publications
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