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Friends of the Earth Europe, ActionAid and Global Witness have welcomed the EU's latest action on sustainable finance, but warned that tougher action is needed to ensure that Europe's financial sector includes robust regulatory safeguards.

"Although there are some positive proposals in this report, it is significantly less ambitious than we had hoped," explains Anne van Schaik of Friends of the Earth Europe. "It is disappointing to see the perpetuation of voluntary instruments in the face of decades of failing investor self-regulation. Strong legislation, including transparent due diligence and accountability mechanisms, is the only way to ensure that Europe's finance and investment industries reconnect to the real economy, to the benefit of citizens, the environment and future generations."

"The report from the European Commission's High Level Expert Group on Sustainable Finance is an important step forward for Europe to direct capital flows towards sustainable development", said Rachel Owens from Global Witness. "However, regulations are urgently required to prevent the financial sector from investing in projects which cause harm, for example contributing to climate change, land grabbing and human rights violations".

Such regulations would immediately impact families across Africa and Asia who are now being forced off their land – for projects backed by money from European investors. Companies looking to invest in land and natural resources rely on finance and loans from the financial institutions we in the EU invest in. However, with few rules in place to regulate those institutions, there is little to stop them financing projects that are socially or environmentally damaging.

The global NGOs particularly welcomed the report's recommendations for:

• reorienting the financial system from short-term profit maximisation to long-term impact, founded on the Paris Climate Change Agreement and Sustainable Development Goals;
• introducing a common classification framework for sustainable finance which includes broad social and environmental concerns;
• requiring that investor duties give greater focus to Environmental, Social and Governance (ESG) factors and extend the time horizons of their asset management, across the entire investment chain;
• including sustainability within the mandate of Supervisory Authorities, including in long-term risk monitoring;
• developing investment performance indicators for social factors which build on international human rights law, consider their impact on growing inequalities, and are integrated within existing EU financial legislation.

"This report marks only the beginning of Europe's roadmap to a sustainable finance future", said Isabelle Brachet of ActionAid. "The onus now lies on the Commission to urgently implement and go beyond its recommendations, by adopting robust legislation that ensures that the financial industry required to exercise due diligence to avoid environmental, social and governance harm."