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European Parliament committee wants to align financial system with long-term climate goals

European Parliament buidling in Brussels, displaying the emblem of the European Parliament and European Union flags

A European Parliament committee wants to make the financial system more resilient, align it with long-term climate goals and channel more investment into sustainable projects.

A new report on sustainable finance from the Economic and Monetary Affairs Committee, issued Tuesday, calls for a "label" to identify sustainable financial strategies, a uniform taxonomy and common standards for green investments, as well as compulsory disclosure requirements on companies for sustainability factors.

"Europe must finally begin to set the sustainability standards itself in order to become the lead market for green financial investments," said Member of European Parliament Sven Giegold, financial and economic policy spokesman of the Greens-European Free Alliance group within Parliament, in a statement accompanying the report.

The committee, known as ECON, called on the European Commission to develop a robust, credible and technology-neutral taxonomy for sustainable investments, and for the commission and member states to phase out direct and indirect subsidies for fossil fuels.

It wants the commission and member states also to use their public investments to contribute to achieving climate targets set at a United Nations meeting in Paris in 2015.

"This report is a milestone in our commitment to greener and more stable financial markets," Mr. Giegold said in the statement. "This is a tailwind for the upcoming legislative proposals of the European Commission. We have built the report on a strong concept of sustainability that encompasses the ecological, the social and the dimension of corporate governance in equal measure."

Members of European Parliament sit in political groups, organized by affiliation rather than nationality. The report was supported by a large majority of the Greens-EFA, the European People's Party/Christian Democrats group, the Progressive Alliance of Socialists and Democrats, and the European United Left-Nordic Green Left, said a news release provided by Mr. Giegold.

The Alliance of Liberals and Democrats for Europe voted against the report, the news release said.

Other requests in the report include "binding stress tests for financial companies to assess the risks of sudden losses in the value of carbon assets"; European supervisory authorities to develop public disclosure and internal risk assessment standards of financial institutions; and an extension of fiduciary duty in the entire investment chain to include sustainability preferences of clients, "regardless of whether they have a possible financial impact or not."

The release also outlined where ECON did not succeed. It said that, in negotiations against a number of parties within the European Parliament, it was unable to agree on a "strong list of negative criteria on what apart from fossil fuels must under no circumstances by included in a sustainable financial product," such as nuclear energy and airport infrastructure.