A just economy will need social as much as green elements, says Fisma's Marcel Haag.

Marcel Haag

Marcel Haag

The European Green Deal is an ambitious plan to cut net emissions of greenhouse gases to zero by 2050; to decouple economic growth from the use of resources; and to ensure that “no person and no place is left behind”. It will also soon incorporate social factors, says Marcel Haag, head of horizontal policies at Fisma, the EU’s directorate-general responsible for policy on banking and finance.

As part of its sustainable finance strategy, the EU has created a green taxonomy and relies on the non-financial reporting disclosures directive and on regulation to improve the transparency of benchmark methodologies. It is also working on the creation of green bond standards and considering an update of current policy.

Q: Where does sustainable finance fit within Europe’s Green Deal?

A: When it comes to the role of sustainable finance as part of the European Green Deal, one should one should bear in mind that our emissions reduction goal — to be the first climate neutral region by 2050 — is part of our European climate law. This means that this obligation to become climate neutral is part of a legal obligation. It will be the law of the land of the EU as soon as the climate law is adopted. And we have committed €1tn to ensure a just transition.

We also need to align the financial flows with our climate and environmental objectives. The financial sector is clearly not on track: our sustainable finance agenda is a policy that aims to make sure that the financial sector reorients capital flows from projects that are harming the climate to projects that will have a substantial positive impact. 

Q: You are reviewing your sustainable finance strategy. What was the result of your consultation with stakeholders?

If we do not cover the social dimension, our climate transition will not be successful

A: Overall, we received positive feedback on the objectives and the direction we have taken so far; but, obviously, there are different views about how to best achieve the goal of further transforming the financial system to achieve a more climate-resilient, more sustainable European economy. There is agreement that all policies should be predictable and clear. And that institutional investors and financial institutions should be clearer about how they factor temperature scenarios into their activities. What is contentious is to what extent measures should be binding or optional. And there are obviously different views on the speed in which this framework should be developed.

Q: As the green taxonomy evolves, are social elements going to be included?

A: We developed a taxonomy that started out as a green taxonomy, focusing on climate and environmental objectives. But now is the time to also look into the social dimension, which is part of our sustainability agenda. The social dimension is also a crucial part of the climate transition, if we want to make it successful. We are reviewing our renewed sustainable finance strategy. We have asked a platform of 50 stakeholders that are helping us with developing our sustainable finance agenda to also look into how to factor in social aspects.

The Green Deal at some point may become wider. One thing is very clear: if we do not cover the social dimension, our climate transition will not be successful.

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Marcel Haag is head of horizontal policies at the EU’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union. He spoke to Silvia Pavoni during the FT Investing for Good conference on November 3, 2020.

The Q&A has been edited for brevity and clarity.

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