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Sustainable finance: Government needs to ensure effective monitoring of EU taxonomy

Feb 05, 2021

Symbolbild - Sustainable Finance

The EU taxonomy serves to protect investors from financial products wrongfully marketed as green. The application of the taxonomy is not systematically monitored. The government must step in to address the situation.

In recent years, the market for sustainable financial investments in Europe has experienced dynamic growth. However, there is no uniform definition on sustainable finance. In adopting the taxonomy, the EU legislator sought to protect investors from financial products wrongfully labelled as environmentally sustainable (“greenwashing”). We have audited the federal government's steps taken to fund sustainable growth including domestic oversight of the EU taxonomy.

The taxonomy is intended to redirect capital flows towards sustainable investments and to reflect the impact of climate change on risk management of banking institutions and insurance companies. The EU taxonomy will only be successful if greenwashing can be prevented. We feel that there is an urgent need for systematic monitoring to ensure that the EU taxonomy is properly applied. However, it is doubtful that the financial supervision function alone can achieve this goal. This is intolerable. The federal government must step in to address the situation.

In our report, we recommend to parliament and the government addressing the shortcomings in the supervision of the EU taxonomy.

 

 

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