BRUSSELS - It's been the one bright spot for banks and money managers in these dark times of sluggish growth, a US$30 trillion treasure trove that has remained largely unregulated. That's about to change.
While Europe had its share of regulatory missteps - including a huge money laundering scandal that exposed shortcomings in how its rules are implemented - it's been at the forefront on issues where the US has taken a hands-off approach. The bloc's new push aims to establish common definitions for green investments and to weed out misleading practices known as"greenwashing" - calling products sustainable even if they don't really help fight climate change - which are often mentioned as an obstacle to further development of the market.
Once officially in place, investment funds that want to claim they contribute to environmental goals would have to disclose to what extent they are compliant with the European standards. Green bonds, which are issued specifically to fund environmentally friendly projects, are the simplest and most established form of sustainable finance. They made up the bulk of some US$346 billion of sustainable debt issued globally this year, already surpassing last year's record of US$265 billion, according to BloombergNEF.
Bank of England Governor Mark Carney has pioneered attempts to address the environmental risks to financial stability. European Central Bank President Christine Lagarde has said that the catalogue could be applied to the institution's asset purchases, though the idea is controversial. "Europe has the potential to build itself into a centre of expertise to attract rising numbers of investors keen to place their funds and savings in green investment options," Valdis Dombrovskis, the EU commissioner responsible for financial services, said at a Bloomberg event in Brussels earlier this month.
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