European Commission

As the financial industry continues to call for more clarity and guidance to handle what even supervisors see as the “astonishing” complexity of the emerging EU framework for sustainable finance, impact investments and ESG, European regulators have added a range of technical details to sustainability rules over recent weeks. 

A comprehensive review by the European Commission has the potential to put the European long-term investment funds (Eltif) regime back on track and set it up for the kind of success Ucits funds have experienced. Eltifs can become competitive with AIFs by removing many factors that made Eltif take-up much lower than had initially been hoped. The investment community has been broadly supportive of the reset.

The EU braces for a legal battle over plans to label nuclear energy and gas as sustainable transition fuels. Luxembourg and Austria are preparing steps to have the proposed delegated act annulled.

Unshell – the name given to the third anti tax-avoidance directive (ATAD III) – would have a “huge impact for Luxembourg, especially for Luxembourg” said Carlo Fassbinder, tax director at the Luxembourg finance ministry.

On the last day of the year, the European Commission secretly circulated a plan to classify the fossil fuel natural gas and nuclear power as ‘sustainable’ investments. It seems the Commission will not publicly consult on this plan - the second chapter of the EU ‘taxonomy’ - while it did so three times for the first chapter, which dealt with renewable energy. 

The reaction to recent European Commission proposals for AIFMD II reform from Luxembourg finance industry participants was positive. On the whole, changes have been kept to a minimum. For Luxembourg this means the alternative fund industry’s current business model does need to change, but the country will have to manage some more back-office tasks, and needs to ensure some more substance.

SFDR and the green investing taxonomy have been broadly well received across Europe, but what if other economic powers adopt contradictory rules? Some signs of action are emerging from global discussions.

The European Commission has identified six key areas to raise its ambitions in the field of sustainable finance. One of them is sustainable finance. To this end, it has drafted a regulation to establish a European standard for green bonds (EUGBS).

This proposal will be a voluntary standard available to all issuers to help finance sustainable investments. Green bonds are already being used to attract financing in sectors such as energy production and distribution, resource efficiency in housing and low-carbon transport infrastructure.

Could regulatory moves be underway that will help unlock the promise around blockchain and distributed ledger technology (DLT)? Too often great new ideas and tools run into a wall of financial sector regulation before they can show their full promise.

What will come next from the EU after the green taxonomy, SFDR and green labelling? Martin Spolc, head of the Sustainable Finance Unit at the Commission’s DG FISMA revealed a six-point roadmap designed to take ESG to the next level at Luxembourg for Finance’s Sustainable Finance Forum on 28 October.