The EU has a role to promote more equal access to climate-related financial risk management mechanisms for businesses and citizens across the EU, FERMA has stated in response to a European Commission public consultation on its renewed sustainable finance strategy.

Financing the European Green Deal and increasing the financial resilience of the economy, companies and citizens will require significant investment across all sectors. Building on the 2018 Action Plan on financing sustainable growth, the renewed sustainable finance strategy will provide a roadmap with new actions to increase private investment in sustainable projects and activities.

The objective is to support the actions set out in the European Green Deal and to manage and integrate climate and environmental risks into our financial system. The initiative will also provide additional enabling frameworks for the European Green Deal Investment Plan.

The consultation, which has just concluded, aimed to collect the views and opinions of interested parties in order to inform the Commission’s renewed strategy on sustainable finance.

On behalf of the European risk management community, FERMA sets out the following key areas for EU attention:

  • Clarification of the financial exposures related to climate change and environmental damage.
  • Increased awareness of long-term systemic threats, including environmental, social and governance (ESG) risks, to help discourage short-termism.
  • Support for the insurance market in defining the extent of climate and environmental risks.
  • Facilitate public-private partnerships, including EU participation, to create broader and more consistent and risk transfer mechanisms for catastrophic risks.
  • Improved access and better data quality for organisations on non-financial risks.
  • Definition of a minimum threshold for ESG ratings, similar to an EU high-level sustainability risk appetite, to guide company investment decisions.
  • A broader market for the supply of comparable, digitalised ratings for corporate sustainability.

FERMA believes that these measures should help Europe prepare better for climate and environmental exposures and mitigate their impact. FERMA is currently working to develop a Resilience Framework for Catastrophic Risks that will create a multi-layered and graduated public-private partnership to encourage the prudential assessment and identification of risks needed to access public funds, while enhancing coordination across the EU.

FERMA CEO Typhaine Beaupérin commented: “The world increasingly faces global systemic risks as shown by COVID19. Measures to ensure resilience and support sustainability will play a key role in Europe’s recovery in the short term and its wealth in the long term. The EU should help companies by clarifying the perimeter of climate and environmental risks and the related impacts on business. This will in turn facilitate their internal assessments and dialogues with investors and credit institutions.”

Find our full response to the consultation here.