High-level Expert Group on Sustainable Finance (HLEG)

Information presented in this profile is for reference only. The Climate Action in Financial Institutions Initiative does not guarantee as to the exhaustiveness of this information and invites you to contact the Secretariat (contact@mainstreamingclimate.org) if you wish to propose any modifications.

By including this profile, the Initiative, its Supporting Institutions and the Secretariat do not endorse the activities described below nor the guidance and information provided in this profile.

Last updated: July 2018


The High-level Expert Group on Sustainable Finance (HLEG) analyzed, between end of 2016 and early 2018, the challenges and opportunities for sustainable finance in Europe. The report and recommendations address sustainability issues in general, with a special focus on climate-related issues, notably regarding climate-related financial risks.

What are the objectives of the initiative?

The HLEG’s mission as mandated by the Directorate‑General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) was: “To submit a report to the [European] Commission setting out the scale and dimensions of the challenges and opportunities that sustainable finance presents; and recommending a comprehensive programme of reforms to the EU financial policy framework, including a clear prioritization and sequencing.”[1]

Who launched it? Who is participating?

  • – Launched by the European Commission’s Directorate‑General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA)
  • – Comprised 20 senior experts from civil society, the finance sector, academia and observers from European and international institutions

Why has this been put into place?

The question of sustainable finance is integrated into discussion around the Capital Market Union (CMU), the third pillar of the European Commission’s Investment Plan for Europe: “Reforms for sustainable finance are necessary to support investment in clean technologies and their deployment, ensure that the financial system can finance growth in a sustainable manner over the long term, and contribute to the creation of a low-carbon, climate resilient economy. Such reforms are essential to meet our climate and environment objectives and international commitments including the delivery of the EU’s commitments under the Paris Agreement on climate change and the objectives of the 2015 Circular Economy package.”[2]

What are the main work streams/areas of work?

Final recommendations were informed by four common themes, addressing sustainability in general and finance in particular:

  • • Need for Europe to achieve a fully coordinated approach to sustainable development, one that synchronizes changes in the financial system with action in the real economy;
  • • Central role of finance as a service function;
  • • Importance of connecting sustainable finance with the specific needs of places across Europe;
  • • Imperative of extending the time horizons of financial decision-making.

 What are outcomes of the initiative linked with the 5 Principles?

The work of the HLEG has led to the elaboration of recommendations for the European Commission. Two recommendations made by the Interim report published in July 2017 have already been translated into political action, unlocking the ability of the public sector to invest in energy efficiency and mobilizing financial regulators and supervisors to take action to ensure that the financial system is protected from environmental-related risks.

The final report of the HLEG presents eight key recommendations:

  1. Establish and maintain a common sustainability taxonomy at the EU level
  2. Clarify investor duties to better embrace long-term horizon and sustainability preferences
  3. Upgrade disclosure rules to make sustainability risks fully transparent, starting with climate change
  4. Key elements of a retail strategy on sustainable finance: investment advice, ecolabel and SRI minimum standards
  5. Develop and implement official European sustainability standards and labels, starting with green bonds
  6. Establish ‘Sustainable Infrastructure Europe’
  7. Governance and Leadership
  8. Include sustainability in the supervisory mandate of the ESAs and extend the horizon of risk monitoring

 The report also includes cross-cutting recommendations on short-termism, benchmarks, accounting, accelerating action to finance energy efficiency investments and others. It also includes sectoral recommendations for financial institutions, notably on banking. Finally, the HLEG also recommends putting into action the recommendations made by the Task Force on Climate-Related Financial Disclosures (TCFD).

The recommendations of the HLEG form the basis of the Action Plan: Financing Sustainable Growth published by the European Commission on March 8th 2018.

One of the next steps outlined in the action plan is that the European Commission set up a technical expert group on sustainable finance (including representatives of Supporting Institutions: BNP Paribas asset management (Helena Vines Fiestas); Cassa Depositi e Prestiti (Pierfrancesco Latini); KfW Bankengruppe (Karl Ludwig Brockmann):

  • To provide a first taxonomy with a particular focus on climate change mitigation activities by Q1 2019. This taxonomy is to be extended to climate change adaptation and other environmental activities by Q2 2019
    To prepare a report on an EU green bond standard by Q2 2019, building on current best practices.

Overview: Actions presented in the European Commission Action Plan “Financing Sustainable Growth”

Action 1: Establishing an EU classification system for sustainable activities
Action 2: Creating standards and labels for green financial products
Action 3: Fostering investment in sustainable projects
Action 4: Incorporating sustainability when providing financial advice
Action 5: Developing sustainability benchmarks
Action 6: Better integrating sustainability in ratings and market research
Action 7: Clarifying institutional investors’ and asset managers’ duties
Action 8: Incorporating sustainability in prudential requirement
Action 9: Strengthening sustainability disclosure and accounting rule-making
Action 10: Fostering sustainable corporate governance and attenuating short-termism in capital markets

Have intermediate or final reports / guidance been issued?

Calendar and milestones

[1] http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3485

[2] https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1490261881953&uri=CELEX:52016DC0601

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

This section aims to support discussions on the implementation of the 5 voluntary Principles for Mainstreaming Climate Action. Information provided in this section is for reference only; the Climate Action in Financial Institutions Initiative, its Supporting Institutions and the Secretariat do not endorse the activities nor the guidance and information provided in this section.

While the HLEG recommendations focus on sustainable finance in general, they emphasize the necessities of dealing with climate risks in particular. A focus on long-term horizons and enhanced transparency and disclosure rules for the management of climate risks can contribute to the management of climate risks.

The HLEG recommends to:

  • – “Extend the horizon of risk monitoring, starting with a focus on climate-related risks”

“Sustainability cannot develop in a context where investment is dominated by short-term considerations. This is because delivering sustainability in economic, social, and environmental dimensions requires large-scale investments in physical assets that are amortised not over a few months but over several years. […] Sustainability requires an ex ante long-term orientation and integration of ESG issues at the time of investment. Ex ante long-term orientation means that at the time an asset is purchased, the investor in principle has the intention of holding it long enough for it to yield real, economic returns. This does not mean that the investor holds all assets indefinitely.”

  • – “Upgrade Europe’s disclosure rules to make climate change risks and opportunities fully transparent.

“Long-term investment decisions require adequate disclosure about long-term sustainability risks and opportunities. Today’s financial disclosures remain too short-term, making it hard to evaluate this information across companies or financial products. Models used by financial analysts rarely capture developments beyond the one- to three-year horizon, for example. Most disclosures also currently rely on qualitative rather than quantitative elements. While this approach is justified for many sustainability issues, relying solely on qualitative elements prevents measurement over time and across sectors.”

  • – “Update the ‘fit and proper’ tests to include an assessment of the individual and collective ability of the members of governing bodies in financial institutions to address sustainability risks, to understand the broader stakeholder context and to take account of clients’ sustainability preferences.”

The HLEG recommendations include a focus on promoting sustainable infrastructures investments and the role of official standards and labels to contribute to the mobilization of additional climate investments.

establish ‘Sustainable Infrastructure Europe’, “an overarching organisation designed to support the development of sustainable infrastructure projects, by providing project development expertise on the ground across all member states.”

“Much progress has been made in mobilizing capital for investment in Europe, in particular through the sizeable and far-sighted Juncker investment plan. While the plan has been very successful and effective, the implementation of dedicated infrastructure investment remains a concern in several member states. Key bottlenecks include a lack of infrastructure development capacity combined with difficulties both of structuring projects appropriately for financing by private investors, and of designing a sufficiently stable local regulatory environment that define pricing and usage policy over time.”

develop and implement official European sustainability standards and labels, starting with green bonds

“As a first step towards establishing official EU sustainability standards, the EU should introduce an official EU Green Bond Standard (EU GBS). As a second step, it should consider an EU Green Bond label to help the market develop fully and maximize its capacity to finance green projects and activities and to contribute to wider sustainability objectives.

The policy objectives for the proposed EU GBS would be:


  • To encourage a substantial increase in investment in green projects and activities
  • To make visible those assets that need to be understood as high priority assets in a low carbon and climate-resilient economy
  • To increase demand from green investors by ensuring that the underlying project of European green bond issuances are aligned with the future EU Sustainability Taxonomy.
  • To promote appropriate reporting of the environmental relevance and/or impact of green assets and projects, including on how the issuance of green bonds actually contributes to scaling up investments in green projects.
  • To create a standard that can serve as reference for other sustainable financial products such as social and sustainable bonds, as well as green, social and sustainable loans.”

The HLEG recommends “To enlarge the role and capabilities of the [European Supervisory Agencies] to promote sustainable finance as part of their mandates.”

“As a first step, the proposals to review the legislation of the ESAs specifically require that they take account of ESG factors, and possible related risk, with their mandate.”

The HLEG thus recommends to: “Build expertise over time on tools for scenario analysis, starting with climate-related risks. Building on the recommendations of the ESRB Advisory Scientific Committee, the pilot conducted by some national supervisory authorities and the recommendations of the TCFD, the HLEG recommends that the relevant ESAs gradually build expertise on climate scenario analysis and other non-cyclical, non-linear risks that may get mispriced by financial markets (bubbles, stranded assets, etc.) supported if needed by a reasonable extra budget.”

As part of its recommendation on disclosure, the HLEG recommends the EU to “endorse the TCFD guidelines and implement these recommendations at the EU level, drawing on the experience of the implementation of France’s Article 173.”

“A first priority should thus be for the EU to make the voluntary experimentation with TCFD disclosure as short and as effective as possible. The Commission should engage in active dialogue around TCFD implementation as soon as possible. This will help to ensure that EU companies, investors and regulators are able to learn form best practice – and adopt it rapidly.”

The first HLEG recommendation “establish and maintain a common sustainability taxonomy at the EU level”  emphasizes that greater transparency should contribute to directing financial flows in a sustainable direction.

“The HLEG’s vision of a taxonomy is one that provides a shared EU classification of sustainable activities that is applicable for all types of assets and capital allocation. […] The taxonomy should be aligned with the EU’s declared public policy goals, including implementation of the Paris Agreement and the SDGs. […]

Potential uses of the EU Sustainability Taxonomy include:

  • · Measuring financial flows towards sustainable development priorities at the asset, portfolio, institutional, regional, national and European levels.
  • · Identifying assets that qualify for financing under European climate and/or green and/or sustainable funding mechanisms.
  • · Providing a consistent starting point for standard-setters and product developers – for example, Green Bonds or research/index providers.
  • · Allowing investors to understand the green/sustainable industrial exposure of their portfolios and to design investment policies aligned with the preferences of their clients and beneficiaries.


  • · Supporting investor engagement with companies around their business models and transition plans.”

According to the HLEG “disclosure by financial institutions is necessary to ensure that the sustainability preferences of their beneficiaries have been taken into account and that their engagement policy covers both financial and non-financial issues”. Therefore, “[t]he EU should endorse the TCFD guidelines and implement these recommendations at the EU level, drawing on the experience of the implementation of France’s Article 173. Given the momentum behind the TCFD and its promising role as an international standard on climate-related disclosure, the review of the Non-Financial Reporting Directive (NFRD) is a unique opportunity to explore how the NFRD requirements could be better aligned with that of the TCFD. Another important area would be to ensure that the NFRD provides a clear distinction between financial and non-financial institutions as the motivations for and implications of sustainability disclosure are different for each.”