"Shifting the Trillions" - Recommendations for the sustainable transformation of the German economy

On 25 February 2021, the Sustainable Finance Committee of the German Federal Government ("SFC") released its final report "Shifting the Trillions" with 31 recommendations on how sustainable finance can help to transform the German economy in order to cope with the social and environmental challenges of the 21st century.

The Committee's recommendations, primarily addressed to the government, are set out in a 132-page report (see a summary of core messages) and split into five categories: (1) Reliable policy framework, (2) future-oriented and integrated reporting, (3) systematic build-up of expertise, (4) sustainability-effective financial products and (5) institutional steadiness.

According to the SFC, the German government has to establish a coherent, future-proof policy framework and should act as a role model.

Among other things, the Committee recommends:

• government sustainability bonds
• public-sector risk cover for the financing of foreign sustainability projects
• product prices to reflect external social and environmental costs, e.g. by means of CO2 pricing, taxes on energy, product standards or supply chain requirements
• in relation to non-financial reporting, to advocate on EU level for
  • an extension of the reporting requirement to companies with more than 250 employees (independently from legal form or capital market orientation)
  • an integration of the reporting into the management report (Lagebericht)
  • future-related reporting duties according to the TCFD framework
  • an obligation to have the reporting audited.
• a central, public and free-of-charge database of standardized ESG raw data on EU level
• obligations for credit institutions to disclose sustainability risks and impacts of their credit granting practice/credit portfolios (subject to thresholds/proportionality)
• sustainability-related qualification standards for certain persons in leading or key positions in the corporate and finance sector
• stronger influence of sustainability aspects on corporate governance, e.g. by way of rules on sustainability-related remuneration (with a recommended 30 % level) and duties of the management and supervisory board in relation to sustainability risks and impacts
• a simple ESG classification system for financial products, based on the EU Disclosure Regulation and using a scale ranging from 1 to 5
• promotion of impact funds with a blended finance structure by changing the current legal framework
• supporting the proposals of the EU Commission in relation to sustainable securitizations
• a "Sustainable Project Hub" to foster a "matchmaking" between sustainable projects and a suitable financing
• a point of contact dealing with conflicts between various sustainability goals
• set up of a "Transformation and Impact Fund" which invests in companies or sectors to support sustainable projects or reorganizations in particular with a view to SMEs
• in the real estate sector, set up of a central database for data/certificates on the energy performance of buildings
• infrastructure for collaborative or individual ESG engagement of institutional investors, e.g. by development of a stewardship code for investors.

See here for the press release in English. An English translation of the entire report is announced to be available in due course.