Date: 23rd June 2023

BETTER FINANCE welcomes the European Commission’s initiative to set clear policy measures regarding climate targets beyond 2030, which ultimately can support the objective of 2050 climate neutrality goal and its realisation.

BETTER FINANCE’s core expertise mainly involves defending the interests of European citizens as financial services users, and we are therefore cognisant of the benefits to continuous improvements of climate targets, which can support climate and environment resilience as well as better protect the real economy, retail investors, consumers and others alike from unintended consequences and barriers that may come from unaddressed climate change issues.

The EU’s legislation in the fields of climate, energy and economic activities linked to greenhouse gas emissions needs to also take into consideration latest technological advancements and the way climate action can be incentivised for all. This would ensure that beyond environmental benefits, European citizens also benefit from long-term economic and societal improvements.

Climate solutions

Individuals - whether retail investors or otherwise - are prone to be impacted by negative effects of climate change in terms of personal material loss as well as wider economic losses. In order to alleviate this, the European Commission should incentivise investments in climate solutions, remove obstacles for retail investors and consumers to invest sustainably, support the role of transition finance and ensure that services offering tangible climate impact remain accessible, fair and transparent as well as affordable.

Climate solutions, including renewables, energy efficiency, storage and capacity are important elements that can support timely climate neutrality by 2050. Additionally, climate solutions sold as products and services to retail non-professional investors can also contribute significantly towards this goal. Since over 65% of retail investors want to invest sustainably, existing obstacles (including but not limited to fees, unclear rules, mismatch of supply and demand, financial advisors’ lack of expertise etc.) should be overcome in order to allow a wider participation of European citizens into the climate neutrality goal of the EU.

Similarly, supporting the role of transition finance and investor engagement can be very impactful way to drive real economy changes that can prevent negative climate change consequences and bring long-term economic benefits. Research shows that retail investors are not able to fully utilise consistent and strong engagement practices with the companies they invest in, which is quite detrimental both in terms of missing out on the opportunity for active share ownership aiming in particular at increasing the focus of the corporate investment plans and business models towards a low carbon pathway and accelerate energy transition plan, but also failing to reorient cash flows towards a green transition completely which poses a much greater risk for the environment in the long run.