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EC heralds sustainable finance moves as funds see net outflows in Q3

Stock & share Background

The European Council (EC) continues to beat the drum for sustainable finance, even as the sector continues to sputter.

Earlier this week, the EC announced it had adopted new regulation to promote sustainable finance The new regulation, it said, would create a new European green bond standard, laying down uniform requirements for issuers that wanted the ‘European green bond’ designation.

“Issuers will be able to demonstrate they are funding legitimate green projects aligned with the EU taxonomy,” the EC continued. “Investors’ confidence in green investment will be enhanced thanks to a framework that reduces the risks posed by greenwashing, ultimately stimulating capital flows into environmentally sustainable projects.

“The regulation establishes a registration system and supervisory framework for external reviewers of European green bonds. To prevent greenwashing in the green bonds market in general, the regulation also provides for some voluntary disclosure requirements for other environmentally sustainable bonds and sustainability-linked bonds issued in the EU.”

Read more: Green bonds drive 2023 global ESG debt market

The regulation was adopted by the EC earlier this week. It will be signed and published in the EU’s Official Journal before entering into force 20 days later and will start applying 12 months after its entry into force.

Clean technologies

This week has also seen a Communication from the EC about the work done by the European Union (EU) to promote and support the development and deployment of clean technologies, with nearly a third of the EU’s budget set to be devoted to climate spending between 2021 and 2027. In total, the budget is set to reach €578bn, or 32.6% of the total budget.

“The EU has been leading the green transition both domestically and globally,” the Communication concluded. “The European Green Deal is an ambitious plan to transform the EU into a modern, resource-efficient and competitive economy. The EU’s growth model is based on a smart policy mix building on a growth enhancing, predictable and simplified regulatory and business environment, faster access to funding, enhancing skills and open trade. The European Single Market, based on open, competitive markets and a supportive social model, diversity and creativity, ensures predictability for investors.”

All of this comes against a background in which the sustainable fund industry on the continent has seen another quarter of outflows, according to the latest Morningstar flows report. The firm said investors, worried about regulatory changes and an uncertain economic climate had withdrawn €20.5bn from funds in the low-sustainability classification, while net inflows into the higher classification were their lowest since the beginning of 2021. Morningstar added that non-sustainable investments funds had meanwhile seen inflows of €17.8bn during the third quarter of 2023.

Pete Carvill

Pete Carvill is a reporter, writer, and editor based in Berlin who has been writing for the B2B and mainstream media since 2007. He is a contributing writer for Expert Investor and, in addition, has...

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