Although the extreme weather events we have seen this summer have been an eye-opener for many people, they only confirm the existing trend: according to NASA, 17 out of the 18 hottest years in recorded history have occurred since the year 2000. So nature is clearly sending us a warning: we are at two minutes to midnight. The time to act is now.
Europe is determined to implement its Paris agreement goals, and for this we need finance. According to our estimate, we will need about €180bn in additional annual investment over the next decade to meet these goals. So this underlines the need for investment.
The European Commission has proposed that the EU should devote a quarter of its budget to climate-related action as of 2021. This would make up €320bn over a seven year period.
But the reality is that public finance alone will not be enough. That is why the European Commission put forward our Action Plan for sustainable finance, to incentivise private finance to put its full weight behind our climate commitments.
And we have already put forward three concrete draft laws within this Action Plan:
The first one is for a classification system, or taxonomy, to define in the financial sector – for financial products - what is green and what is not.
The second is a proposal on positive-carbon-impact and low-carbon benchmarks, to help more finance to flow towards decarbonising our economy.
And the third is about improving the disclosure of how asset managers and institutional investors integrate environmental and climate change aspects in their investment decisions.
Because the truth is that more and more people around the world want their savings to be invested in environment-friendly projects. 3 investors out of 4 say that environmental and climate objectives have become more important to them in the past five years. And among young people this figure is even higher. So clearly there is demand.
Therefore, what we need to create is supply and also clarity. So among the next steps is to create an EU label for green financial products, so that also retail investors – who might be less sophisticated - can easily tell which investment options are green.
And we are looking at how we can include more climate-related issues in non-financial disclosures. And here we are going to follow up on the excellent work of the FSB Task Force on Climate-related Financial Disclosures - under the leadership of Mark Carney and Michael Bloomberg. We want to see how we can align our EU requirements more closely with the work of this task force.
So to summarise, we hope that at the end of the day we will be able to make green finance the new normal, with green and sustainable investments flowing across Europe and across the entire globe, with millions of new jobs being created in the transition to a low-carbon economy.
One final thought: In the EU, as our emissions have dropped by over 22% since 1990, our economy has been growing by more than 50%. So there is no contradiction between reducing carbon emissions and ensuring economic growth.