The European Association of Co-operative Banks considers the work on EU ECOLABEL for Financial Products as an important step and welcomes the possibility to comment on the Draft technical report of the JRC. The EACB has already expressed the co-operative banks’ point of view answering to the first consultation on the preliminary report that was closed in May 2019 and welcomes some of the novelties proposed in the second version of the report. Given the fact that Co-operative Banks are typically retail banks, who interface mostly with households and SMEs clients, we are answering to this specific consultation from the point of view of “distributors”. Please find below some of the comments highlighted.
- One of the financial products included in the scope of the EU Ecolabel is represented by “Green bonds”. According to the additional research of the JRC to further investigate the current situation, the European green bond market is still very small in size compared to the market of conventional bonds, corresponding to approximately 2.5% of the total bonds market in 2018 (p. 6 of the report). From a cooperative banking perspective, the Ecolabel could allow banks to develop sustainable products in general, including bonds, and increase consistency. If there is a mandatory need for green bond funds to have at least 70% of bonds labelled under GBS to receive the Ecolabel, this might limit the amount of “Ecolabelled” green bond funds as we might not see enough bonds issued under GBS to have a working Ecolabel green bond fund, at least in the beginning. We would suggest a transition period of at least 3 years, allowing to count the current and different green bonds frameworks in the number of the eligible products for the Ecolabel.
- The JRC has introduced a new proposal to verify the greenness of a deposit account, aiming to test its possible inclusion in the scope of the Ecolabel. The EACB supports the proposal to define a green savings or deposit account in relation with the credit provided to green projects or companies engaged in green economic activities. However, the EACB suggests to further investigate the feasibility and practicability of this proposal in order to avoid the creation of a framework that could not work for all the financial market participants. Essential to being able to verify the extent to which a deposit account is ‘green’ is the possibility to identify and trace the link between the money that is placed in deposit and how that money is then used by a credit institution to provide (green) loans to applicants for credit. We need to test and define how this could function in practice. It would be worth thinking about the implementation of a transition period in this regard.
- Each criterion proposed in the technical report indicates also the specific assessment and verification requirements to be certified in order to obtain the Ecolabel for financial products (pp. 30-31). The EACB would like to highlight the importance to better clarify the verification and accreditation process, ensuring transparency and identifying the competent bodies that will be appointed for the verification of the requirements, ensuring at the same time that the body in question employs sufficient financial sector expertise.
- The link between the EU Ecolabel criteria for financial products and the EU Taxonomy was already contained in the Action Plan on Sustainable Growth. Together with the Disclosure Regulation, the Taxonomy Regulation will require firms to disclose the degree of environmental sustainability of mainstream funds that are promoted as environmentally friendly, or to include disclaimers where they do not. The EACB warns about the possibility that the new disclosure requirements under the Taxonomy regulation (art. 4 alpha, beta and gamma) would possibly create a lack of clarity when applying also to EU Ecolabel products. Indeed, those funds that are not promoted as environmentally sustainable should include disclaimers stating that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable investments.
- It is essential to have reliable and available data. The EACB highly recommend to give financial institutions free access to already existing environmental and social data (eg. available in CDP). For this reason we would like to suggest a Commission initiative that will allow to start collecting & providing the ESG data as already available in the market and reported by corporates in the EU in an electronic form, based on both aggregate and individual basis, under one of the main statistics centers in the EU (i.e. EUROSTAT). Such a database shall be open to non-financial corporates which can insert – on a voluntary basis – ESG raw data.
- We also wish to highlight attention to other regulation, which may clash with the criteria and thresholds, as well as the requirements relating to pre-contractual information to clients. We must ensure not to add more layers of information to an already complex body of (pre-) contractual information that has to be provided.
- Dealing with the exclusion of companies that violate certain criteria is of central importance for the Ecolabel. As there are some uncertainties it is important for us that the process clarifies more precisely from when on such an exclusion applies (the underlying fact is often only known afterwards) and for how long (when is it considered "expired”).
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