Published: 14.03.2023

On 9 March the first Sustainability Breakfast organised by Latvijas Banka took place. It brought together more than 70 executives of financial market participants and sustainability experts representing nearly all financial market segments. The aim of the day's meeting was to introduce financial market participants to the key aspects of sustainability considerations in the supervisory priorities playing an increasingly important role in the work of European financial sector supervisory authorities.

Kristīne Černaja-Mežmale, Member of the Council of Latvijas Banka, emphasises: "Sustainability is here to stay on the agenda of financial market participants and supervisors. It has to be accepted and everyone has to adapt to this new situation. Reforms to promote sustainable finance continue both at European and global levels, believing that it is the financial sector that has the capacity and the opportunity to embody sustainable behaviour on a broader scale."

During the event, Latvijas Banka briefed financial market participants on the sustainability aspects included in the supervisory priorities of both European supervisory authorities and Latvijas Banka, as well as on the sustainability events planned for 2023. The sustainability roadmap for Latvia's financial sector and other sustainability-related matters were also discussed.

Latvijas Banka also presented the conclusions drawn from the Agricultural Sector Review.

According to Santa Bērziņa, Head of the Macroeconomic Analysis Division of the Monetary Policy Department, "Public funding plays a major role in agriculture, thus society has the right to choose environmentally friendly and climate-friendly farming. European Union initiatives, including the common agricultural policy, are also focused on greener farming. Will Latvia see a practice beneficial for the environment being applied more widely? It depends on the direction of funding and the public's desires as well as the opportunities to act sustainably."

Meanwhile, Māris Vainovskis, Senior Partner at the law firm Eversheds Sutherland Bitāns, presented the results of the project "EU Taxonomy Implementation and Sustainable Finance Roadmap for Estonia and Latvia". The project aimed to support businesses and individuals, being aware of the need to move towards sustainability and an emission-free economy and facilitating the private sector's access to sustainable finance. The conducted research suggests that a significant demand for sustainable services and goods is emerging in society and that businesses have started to introduce sustainability practices into their operations. At the same time, the surveyed respondents believe that the financial sector needs to act to promote sustainable growth and investors indicate that sustainability is an important factor when considering new investment opportunities.

The International Sustainability Standards Board intends to publish standards for sustainability-related financial disclosures already in the first half of this year, marking an important step towards common global standards in this area.

The gradual implementation of the European Union's sustainable finance framework is also progressing, with large companies working to ensure that their systems comply with sustainability disclosure requirements in the context of the Corporate Sustainability Reporting Directive (CSRD) from 2025, and financial sector participants being obliged to disclose such information in line with the requirements specified in the Sustainable Finance Disclosure Regulation (SFDR) already from this year.

Just a few days ago, a provisional agreement was also reached between the Council of the European Union and the European Parliament on the creation of European green bonds (EuGB). New requirements will also be introduced in other areas, such as the inclusion of sustainability-related terms in the names of investment funds and the integration of sustainability considerations into the remuneration of alternative investment fund managers.

Over the past year, international institutions have started to focus on the growing importance of biodiversity considerations in the operations of companies. At the same time, a number of challenges have been faced in the implementation of the European Green Deal in the area of sustainable finance, such as the Russian war in Ukraine, the impact of the United States' green subsidy plan on trade relations with the European Union, growing concerns about the adequacy of environmental, social and governance ratings, and the decline in returns on sustainable investment. This serves as a test of the resilience of the previous sustainability commitments made by the parties involved.

This year, Latvijas Banka is planning a wide range of events targeting different segments of the financial market. Although Latvijas Banka continues to apply a proportionality approach to supervision, we expect market participants to be demanding of themselves, their clients and their cooperation partners.

The Sustainability Breakfast is a new initiative launched by Latvijas Banka. The series of events, which includes meetings with the representatives of the executives of financial market participants as well as with experts and professionals in the field, is designed to discuss the practical aspects of methodology, regulation and governance in the area of sustainability.

The next Sustainability Breakfast is expected to focus on guidelines for the preparation of sustainability strategies, while the remaining two Sustainability Breakfasts this year will focus on disclosure and decision-making as well as assessing the materiality of sustainability risks.