European leadership in sustainable finance

Juan Carlos Delrieu, director of strategy and sustainability of the Spanish Banking Association (AEB), published an article in the economic newspaper “Cinco Días” revisiting some lessons from the past, that could be useful to develop an agile and efficient regulatory framework with real impact that allows Europe to lead the development of a sustainable economy and finance.

The main ideas highlighted in the article are as follows:

• Europe has found in sustainability an international arena in which it can lead and create standards: according to the article, aspects such as climate change, the transformation of the economy towards a more environmentally friendly model or social equity have become essential principles for the EU. Developing a more sustainable financial system is key to ensuring the flow of public and private financing necessary for the transformation towards a more sustainable economy.
   
• Europe has developed an ambitious strategy in this direction as a result of which the "EU Taxonomy Regulation" has emerged, to define what is considered an "environmentally sustainable activity", in line with the Sustainable Development Goals of the 2030 Agenda and the European Green Pact. According to the article, although this regulatory framework is still incomplete, "it is more than enough to support for the development of sustainable finance and drive the flow of the capital needed to finance the transformation towards a decarbonized economy."
   
• Managing the risks and opportunities arising from climate change is a new and complex process for all actors involved. The author considers that, if the EU wants to aspire to become a global reference and to have a real impact, it should go for flexible and easily enforceable protocols and standards supported by digitalization, rather than striving to lead sustainability through a complex and incomplete regulatory framework that could arise due to the mix of the different proposals from regulators and supervisors. The author warns of the risk of undermining financial and technological innovation with excessive regulation.