Many countries are making “green” recovery measures a central part of stimulus packages to drive sustainable, inclusive, resilient economic growth and improve well-being in the wake of the COVID-19 crisis. However some countries are also implementing measures that risk having a negative environmental impact and locking in unsustainable growth, according to new OECD analysis discussed by member country ministers today.
New OECD analysis, Making the Green Recovery Work for Jobs, Income and Growth, indicates that OECD member governments have committed USD 312 billion of public resources to a green recovery, according to a preliminary estimate that will be refined in the coming months. However, a number of other measures within broader recovery packages are going into “non-green” spending such as fossil fuel investments.
“It is encouraging to see many governments seizing this once-in-a-lifetime opportunity to ensure a truly sustainable recovery, but countries should go much further in greening their support packages,” said OECD Secretary-General Angel Gurría, during a Ministerial Roundtable to discuss the issue. “Climate change and biodiversity loss are the next crises around the corner and we are running out of time to tackle them. Green recovery measures are a win-win option as they can improve environmental outcomes while boosting economic activity and enhancing well-being for all.” (Read the full speech.)
The analysis finds that among OECD and other major economies, a majority of countries have included measures directed at supporting the transition to greener economies in their recovery strategies. These include grants, loans and tax relief for sustainable transport and mobility, the circular economy and clean energy research; financial support to households for improved energy efficiency and renewable energy installations; and measures to foster the restoration of ecosystems.
At the same time, some countries have unveiled measures likely to have a direct or indirect negative impact on environmental outcomes. Some of these are temporary and form part of emergency economic rescue plans; others risk having longer-term implications. Measures include plans to roll back environmental regulations, reductions or waivers of environment-related taxes or charges, unconditional bailouts of emissions-intensive industries or companies, and increased subsidies of fossil fuel infrastructure investment.
“Addressing global issues such as climate change, biodiversity loss, ocean degradation, and inefficient resource use is more important than ever as we seek to rebuild our economies and enhance resilience against future shocks,” said Spanish Deputy Prime Minister and Minister for the Ecological Transition and the Demographic Challenge Teresa Ribera, chairing the Roundtable. “Well designed and implemented stimulus packages can drive a recovery that is both green and inclusive, driving income, prosperity and jobs as well as accelerating action on national and global environmental goals.”
The meeting included ministers of environment, climate or ecological transition from OECD member countries and Costa Rica as well as the European Commission Executive Vice President. The Roundtable is part of the preparations of the OECD’s Ministerial Council Meeting, which will take place on 28-29 October under the chairmanship of Spain and with Chile, Japan and New Zealand as Vice-chairs. This Roundtable comes just before the OECD releases its Interim Economic Outlook on 16 September.
The analysis notes that a period of low oil prices offers an opportunity to scale up the introduction of carbon pricing and continue phasing out support for fossil fuels. Taxing environmentally harmful consumption and production can mitigate environmental harm while improving economic efficiency. It is crucial that energy tax reforms do not increase the share of “energy poor”, as good access to energy services is essential for good standards of living. The distributional implications of other pricing instruments, such as taxes and charges on vehicle and fuel use should be also addressed. Similarly, reform of fossil fuel subsidies, which amounted to USD 582 billion in 2019 according to OECD and IEA data, should be accompanied by transition support for industries, communities, regions and vulnerable consumers.
The OECD analysis underlines the need to monitor and evaluate the impact of recovery measures on environmental outcomes, something that was lacking after the 2008 financial crisis. It presents 13 environmental indicators that can be used to measure the impact of stimulus measures, including carbon intensity, fossil fuel support, exposure to air pollution, water stress and environmentally related tax revenue.
Read Making the Green Recovery Work for Jobs, Income and Growth
Access the OECD’s Green Recovery platform
CONTACT:

Catherine Bremer, OECD Media Office | catherine.bremer[at]oecd.org

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Report of the Climate-Related Market Risk Subcommittee, Market Risk Advisory Committee of the U.S. Commodity Futures Trading Commission.
Below includes the executive summary, while access to the full report can be found here: Managing Climate Risk in the U.S. Financial System
Executive Summary
Climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy. Climate change is already impacting or is anticipated to impact nearly every facet of the economy, including infrastructure, agriculture, residential and commercial property, as well as human health and labor productivity. Over time, if significant action is not taken to check rising global average temperatures, climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income, and opportunity. Even under optimistic emissions- reduction scenarios, the United States, along with countries around the world, will have to continue to cope with some measure of climate change-related impacts.
This reality poses complex risks for the U.S. financial system. Risks include disorderly price adjustments in various asset classes, with possible spillovers into different parts of the financial system, as well as potential disruption of the proper functioning of financial markets. In addition, the process of combating climate change itself—which demands a large-scale transition to a net-zero emissions economy—will pose risks to the financial system if markets and market participants prove unable to adapt to rapid changes in policy, technology, and consumer preferences. Financial system stress, in turn, may further exacerbate disruptions in economic activity, for example, by limiting the availability of credit or reducing access to certain financial products, such as hedging instruments and insurance.
A major concern for regulators is what we don’t know. While understanding about particular kinds of climate risk is advancing quickly, understanding about how different types of climate risk could interact remains in an incipient stage. Physical and transition risks may well unfold in parallel, compounding the challenge. Climate risks may also exacerbate financial system vulnerabilities that have little to do with climate change, such as historically high levels of corporate leverage. This is particularly concerning in the short- and medium-term, as the COVID 19 pandemic is likely to leave behind stressed balance sheets, strained government budgets, and depleted household wealth, which, taken together, undermine the resilience of the financial system to future shocks.
The central message of this report is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks. Achieving this goal calls for strengthening regulators’ capabilities, expertise, and data and tools to better monitor, analyze, and quantify climate risks. It calls for working closely with the private sector to ensure that financial institutions and market participants do the same. And it calls for policy and regulatory choices that are flexible, open-ended, and adaptable to new information about climate change and its risks, based on close and iterative dialogue with the private sector.
At the same time, the financial community should not simply be reactive—it should provide solutions. Regulators should recognize that the financial system can itself be a catalyst for investments that accelerate economic resilience and the transition to a net-zero emissions economy. Financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition.
Findings of the Report
This report begins with a fundamental finding—financial markets will only be able to channel resources efficiently to activities that reduce greenhouse gas emissions if an economy-wide price on carbon is in place at a level that reflects the true social cost of those emissions. Addressing climate change will require policy frameworks that incentivize the fair and effective reduction of greenhouse gas emissions. In the absence of such a price, financial markets will operate suboptimally, and capital will continue to flow in the wrong direction, rather than toward accelerating the transition to a net-zero emissions economy. At the same time, policymakers must be sensitive to the distributional impacts of carbon pricing and other policies and ensure that the burden does not fall on low-to-moderate income households and on historically marginalized communities. This report recognizes that pricing carbon is beyond the remit of financial regulators; it is the job of Congress.
A central finding of this report is that climate change could pose systemic risks to the U.S. financial system. Climate change is expected to affect multiple sectors, geographies, and assets in the United States, sometimes simultaneously and within a relatively short timeframe. As mentioned earlier, transition and physical risks—as well as climate and non-climate-related risks—could interact with each other, amplifying shocks and stresses. This raises the prospect of spillovers that could disrupt multiple parts of the financial system simultaneously. In addition, systemic shocks are more likely in an environment in which financial assets do not fully reflect climate-related physical and transition risks. A sudden revision of market perceptions about climate risk could lead to a disorderly repricing of assets, which could in turn have cascading effects on portfolios and balance sheets and therefore systemic implications for financial stability.
At the same time, this report finds that regulators should also be concerned about the risk of climate-related “sub-systemic” shocks. Sub-systemic shocks are defined in this report as those that affect financial markets or institutions in a particular sector, asset class, or region of the country, but without threatening the stability of the financial system as a whole. This is especially relevant for the United States, given the country’s size and its financial system, which includes thousands of financial institutions, many regulated at the state level. Sub-systemic shocks related to climate change can undermine the financial health of community banks, agricultural banks, or local insurance markets, leaving small businesses, farmers, and households without access to critical financial services. This is particularly damaging in areas that are already underserved by the financial system, which includes low-to-moderate income communities and historically marginalized communities.
The report finds that, in general, existing legislation already provides U.S. financial regulators with wide-ranging and flexible authorities that could be used to start addressing financial climate-related risk now. This is true across four areas—oversight of systemic financial risk, risk management of particular markets and financial institutions, disclosure and investor protection, and the safeguarding of financial sector utilities. Presently, however, these authorities and tools are not being fully utilized to effectively monitor and manage climate risk. Further rulemaking, and in some cases legislation, may be necessary to ensure a coordinated national response.
While some early adopters have moved faster than others in recent years, regulators and market participants around the world are generally in the early stages of under- standing and experimenting with how best to monitor and manage climate risk. Given the considerable complexities and data challenges involved, this report points to the need for regulators and market participants to adopt pragmatic approaches that stress continual monitoring, experimentation, learning, and global coordination. Regulatory approaches in this area are evolving and should remain open to refinement, especially as understanding of climate risk continues to advance and new data and tools become available.
Insufficient data and analytical tools to measure and manage climate-related financial risks remain a critical constraint. To undertake climate risk analysis that can inform decision-making across the financial system, regulators and financial institutions need reliable, consistent, and comparable data and projections for climate risks, exposure, sensitivity, vulnerability, and adaptation and resilience. Demand will likely grow for public and open access to climate data, including for primary data collected by the government. Public data will enable market participants to, among other things, compare publicly available disclosure information and sustainability-benchmarked financial products. At the same time, proprietary data and analytical products can introduce innovations that improve climate risk management. A key challenge will be how best to balance the need for transparency through public data on one hand, with the need to foster private innovation through proprietary data, on the other.
The lack of common definitions and standards for climate-related data and financial products is hindering the ability of market participants and regulators to monitor and manage climate risk. While progress has been made in this area thanks to voluntary disclosure frameworks and work by foreign regulators, the lack of standards, and differences among standards, remains a barrier to effective climate risk management. The problem is compounded by a lack of international coordination on data and methodology standards. A common set of definitions for climate risk data, including modeling and calculation methodologies, is important for developing the consistent, comparable, and reliable data required for effective risk management. Also, taxonomies or classification systems can help foster greater transparency and comparability in markets for financial products labeled as “green” or “sustainable.”
Climate-related scenario analysis can be a useful tool to enable regulators and market participants to understand and manage climate-related risks. Scenarios illustrate the complex connections and dependencies across technologies, policies, geographies, societal behaviors, and economic outcomes as the world shifts toward a net-zero emissions future. Scenario analysis can help organizations integrate climate risks and opportunities into a broader risk management framework, as well as understand the potential short-term impact of specific triggering events. Scenario analysis is gaining traction in several contexts, both domestically and internationally, and regulators are increasingly using scenario analysis to foster greater risk awareness among financial market actors.
Yet, the limitations of scenario analysis should be recognized. While useful, climate scenarios and the models that analyze them have important limitations. Scenarios are sensitive to key assumptions and parameters, most have been developed for purposes other than financial risk analysis, and they cannot fully capture all the potential effects of climate- and policy-driven outcomes. Scenario analysis should have a valuable place in the risk management toolkit, but it should be used with full awareness of what it can and cannot do.
The disclosure by corporations of information on material, climate-related financial risks is an essential building block to ensure that climate risks are measured and managed effectively. Disclosure of such information enables financial regulators and market participants to better understand climate change impacts on financial markets and institutions. Issuers of securities can use disclosure to communicate risk and opportunity information to capital providers, investors, derivatives customers and counterparties, markets, and regulators. Issuers of securities can also use disclosures to learn from peers about climate-related strategy and best practices in risk management. Investors can use climate-related disclosures to assess risks to firms, margins, cash flows, and valuations, allowing markets to price risk more accurately and facilitating the risk-informed allocation of capital.
Demand for disclosure of information on material, climate-relevant financial risks continues to grow, and reporting initiatives have led to important advances. Investors and financial market actors have long called for decision useful climate risk disclosures, and in 2019, more than 630 investors managing more than $37 trillion signed the
Global Investor Statement to Governments on Climate Change, which called on governments to improve climate-related financial reporting. Disclosure frameworks have been developed to enhance the quality and comparability of corporate disclosures, most notably, the Task Force on Climate-related Financial Disclosures (TCFD). Also, in 2010, the U.S. Securities and Exchange Commission (SEC) published Commission Guidance Regarding Disclosure Related to Climate Change, which provides public companies with interpretive guidance on existing SEC disclosure requirements as they apply to climate change.
However, the existing disclosure regime has not resulted in disclosures of a scope, breadth, and quality to be sufficiently useful to market participants and regulators. While disclosure rates are trending in a positive direction, an update published by the TCFD found that surveyed companies only provided, on average, 3.6 of the 11 total TCFD recommended disclosures. Large companies are increasingly disclosing some climate-related information, but significant variations remain in the information disclosed by each company, making it difficult for investors and others to understand exposure and manage climate risks. In addition, the 2010 SEC Guidance has not resulted in high-quality disclosure across U.S. publicly listed firms; it could be updated in light of global advancements in the past 10 years.
In addition to the absence of an economy-wide carbon pricing regime in the United States, other barriers are holding back capital from flowing to sustainable, low-carbon activities. One involves the misperception among mainstream investors that sustainable or ESG (environmental, social, and governance) investments necessarily involve trading off financial returns relative to traditional investment strategies. Another is that the market for products widely considered to be “green” or “sustainable” remains small relative to the needs of institutional investors. In addition, lack of trust in the market over concerns of potential “greenwashing” (misleading claims about the extent to which a financial product or service is truly climate-friendly or environmentally sustainable) may be holding back the market. And policy uncertainty also remains a barrier, including in areas such as regulation affecting the financial products that U.S. companies may offer their employees through their employer-provided retirement plans.
These barriers can be addressed through a variety of initiatives. For example, a wide range of government efforts—through credit guarantees and other means of attracting private capital by reducing the risks of low-carbon investments—catalyze capital flows toward innovation and deployment of net-zero emissions technologies. A new, unified federal umbrella could help coordinate and expand these government programs and leverage institutional capital to maximize impact and align the various federal programs. Climate finance labs, regulatory sandboxes, and other regulatory initiatives can also drive innovation by improving dialogue and learning for both regulators and market innovators, as well as via business accelerators, grants, and competitions providing awards in specific areas of need. In addition, clarifying existing regulations on fiduciary duty, including for example, those concerning retirement and pension plans, to confirm the appropriateness of making investment decisions using climate-related factors—and more broadly, ESG factors that impact risk-return—can help unlock the flow of capital to sustainable activities and investments.
Derivatives markets can be part of the solution. Refinements or modifications could be made to existing instruments to reduce derivatives market participants’ risk exposure. For example, commodity derivatives exchanges could address climate and sustainability issues by incorporating sustainability elements into existing contracts and by developing new derivatives contracts to hedge climate-related risks. New products may include weather, ESG, and renewable generation and electricity derivatives. However, development of new derivatives will require that the relevant climate-related data is transparent, reliable, and trusted by market participants. This also applies to a wide range of asset classes that can direct capital to climate-related opportunities and help manage climate risk.
U.S. regulators are not alone in confronting climate change as a financial system risk; international engagement by the United States could be significantly more robust. Financial regulators and other actors have launched important initiatives to tackle the challenge. The United States already participates in the Basel Committee on Banking Supervision’s climate task force, the International Organization of Securities Commissions (IOSCO) sustainable finance network, and relevant committees within the Financial Stability Board (FSB) to study climate-related financial risks. However, at the federal level the United States is not yet a member of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the Coalition of Finance Ministers for Climate Action, or the Sustainable Insurance Forum (SIF). The Group of Seven (G7) and Group of Twenty (G20), in which the United States plays a central role, could also address this challenge and promote international cooperation, but only if the United States is supportive.
Key Recommendations
The full list of the report’s recommendations can be found at the end of relevant chapters and compiled in an annex at the end of this report. Below, we highlight some of the most important.
We recommend that:

The United States should establish a price on carbon. It must be fair, economy-wide, and effective in reducing emissions consistent with the Paris Agreement. This is the single most important step to manage climate risk and drive the appropriate allocation of capital. (Recommendation 1)
All relevant federal financial regulatory agencies should incorporate climate-related risks into their mandates and develop a strategy for integrating these risks in their work, including into their existing monitoring and oversight functions. (Recommendation 4.1)
The Financial Stability Oversight Council (FSOC)—of which the Commodity Futures Trading Commission (CFTC) is a voting member—as part of its mandate to monitor and identify emerging threats to financial stability, should incorporate climate-related financial risks into its existing oversight function, including its annual reports and other reporting to Congress. (Recommendation 4.2)
Research arms of federal financial regulators should undertake research on the financial implications of climate-related risks. This research program should cover the potential for and implications of climate-related “sub-systemic” shocks to financial markets and institutions in particular sectors and regions of the United States, including, for example, agricultural and community banks and financial institutions serving low-to-moderate income or marginalized communities. (Recommendation 4.3)
U.S. regulators should join, as full members, international groups convened to address climate risks, including the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the Coalition of Finance Ministers for Climate Action, and the Sustainable Insurance Forum (SIF). The United States should also engage actively to ensure that climate risk is on the agenda of G7 and G20 meetings and bodies, including the FSB and related committees and working groups. (Recommendation 4.6)
Financial supervisors should require bank and nonbank financial firms to address climate-related financial risks through their existing risk management frameworks in a way that is appropriately governed by corporate management. That includes embedding climate risk monitoring and management into the firms’ governance frameworks, including by means of clearly defined oversight responsibilities in the board of directors. (Recommendation 4.7)
Working closely with financial institutions, regulators should undertake—as well as assist financial institutions to undertake on their own—pilot climate risk stress testing as is being undertaken in other jurisdictions and as recommended by the NGFS. This climate risk stress testing pilot program should include institutions such as agricultural, community banks, and non-systemically important regional banks. (Recommendation 4.8) In this context, regulators should prescribe a consistent and common set of broad climate risk scenarios, guidelines, and assumptions and mandate assessment against these scenarios. (Recommendation 6.6)
Financial authorities should consider integrating climate risk into their balance sheet management and asset purchases, particularly relating to corporate and municipal debt. (Recommendation 4.10)
The CFTC should undertake a program of research aimed at understanding how climate-related risks are impacting and could impact markets and market participants under CFTC oversight, including central counterparties, futures commission merchants, and speculative traders and funds; the research program should also cover how the CFTC’s capabilities and supervisory role may need to adapt to fulfill its mandate in light of climate change and identify relevant gaps in the CFTC’s regulatory and supervisory framework. (Recommendation 4.11)
State insurance regulators should require insurers to assess how their underwriting activity and investment portfolios may be impacted by climate-related risks and, based on that assessment, require them to address and disclose these risks. (Recommendation 4.12)
Financial regulators, in coordination with the private sector, should support the avail- ability of consistent, comparable, and reliable climate risk data and analysis to advance the effective measurement and management of climate risk. (Recommendation 5.1)
Financial regulators, in coordination with the private sector, should support the devel- opment of U.S.-appropriate standardized and consistent classification systems or taxonomies for physical and transition risks, exposure, sensitivity, vulnerability, adapta- tion, and resilience, spanning asset classes and sectors, in order to define core terms supporting the comparison of climate risk data and associated financial products and services. To develop this guidance, the United States should study the establishment of a Standards Developing Organization (SDO) composed of public and private sector members. (Recommendation 5.2)
Material climate risks must be disclosed under existing law, and climate risk disclosure should cover material risks for various time horizons. To address investor concerns around ambiguity on when climate change rises to the threshold of materiality, financial regulators should clarify the definition of materiality for disclosing medium- and long- term climate risks, including through quantitative and qualitative factors, as appropriate. (Recommendation 7.2)
In light of global advancements in the past 10 years in understanding and disclosing climate risks, regulators should review and update the SEC’s 2010 Guidance on climate risk disclosure to achieve greater consistency in disclosure to help inform the market. Regulators should also consider rulemaking, where relevant, and ensure implementation of the Guidance. (Recommendation 7.5)
Regulators should require listed companies to disclose Scope 1 and 2 emissions. As reliable transition risk metrics and consistent methodologies for Scope 3 emissions are developed, financial regulators should require their disclosure, to the extent they are material. (Recommendation 7.6)
The United States should consider integration of climate risk into fiscal policy, partic- ularly for economic stimulus activities covering infrastructure, disaster relief, or other federal rebuilding. Current and ongoing fiscal policy decisions have implications for climate risk across the financial system. (Recommendation 8.1)
The United States should consolidate and expand government efforts, including loan authorities and co-investment programs, that are focused on addressing market failures by catalyzing private sector climate-related investment. This effort could centralize existing clean energy and climate resilience loan authorities and co-investment programs into a coordinated federal umbrella. (Recommendation 8.2)
Financial regulators should establish climate finance labs or regulatory sandboxes to enhance the development of innovative climate risk toolsas well as financial products and services that directly integrate climate risk into new or existing instruments. (Recommendation 8.3)
The United States and financial regulators should review relevant laws, regulations and codes and provide any necessary clarity to confirm the appropriateness of making investment decisions using climate-related factors in retirement and pension plans covered by the Employee Retirement Income Security Act (ERISA), as well as non-ERISA managed situations where there is fiduciary duty. This should clarify that climate-related factors—as well as ESG factors that impact risk-return more broadly—may be considered to the same extent as “traditional” financial factors, without creating additional burdens. (Recommendation 8.4)
The CFTC should coordinate with other regulators to support the development of a robust ecosystem of climate-related risk management products. (Recommendation 8.5)

AUTHORS

Commissioner Rostin Behnam, Sponsor

David Gillers, Chief of Staff, Office of Commissioner Behnam

Bob Litterman, Chairman

Leonardo Martinez-Diaz, Editor

Jesse M. Keenan, Editor

Stephen Moch, Associate Editor

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Countries need to work together to defend the ocean from a steady rise in temperature, pollution and overfishing that threatens its ability to continue supporting marine life and providing food and income to billions of people, according to a new OECD report.
Sustainable Ocean for All: Harnessing the benefits of sustainable ocean economies for developing countries says that with ocean-related economic sectors forecast to grow rapidly over the next decade, ensuring this development takes place in a sustainable way is critical.
While the COVID-19 crisis is hurting key ocean-based sectors, such as tourism and shipping, demands on marine resources for food, energy, minerals, transport, tourism and leisure will persist as the global population grows towards an expected 9 billion by 2050. If managed sustainably, the ocean could have the capacity to regenerate, be more productive, and support more prosperous societies. This will require governments to support those sectors less equipped to foster sustainable ocean economies by facilitating their access to finance and policy evidence.
“More than 3 billion people rely on the ocean for their livelihoods, and we are all dependent on it for supporting ecosystems, providing food and regulating the climate. Yet human activity is causing long-lasting and in some cases irreversible damage to it,” said OECD Secretary-General Angel Gurría. “It is crucial that we invest in ocean-related sectors in a way that fosters environmental and economic sustainability and puts people’s well-being at the centre, especially as we shape the recovery from COVID-19.”
Noting that the poorest countries tend to be both the most exposed to the effects of ocean degradation and the least equipped to respond, the report calls for co-ordinated action and more effective international development co-operation to improve sustainability of the ocean economy. The United Nations Decade of Ocean Science for Sustainable Development, starting in 2021, should foster greater use of science and innovation to develop sustainable practices in a post-COVID world.
The report calls on all countries to phase out government support for environmentally harmful economic activities and use instruments like fees, charges, taxes and tradable permits to discourage over-exploitation, pollution and greenhouse emissions and encourage conservation and sustainable development of ocean activities. Such instruments can also generate much-needed financing for ocean sustainability. Taxes relevant to ocean sustainability – in particular taxes on ocean-related pollution, transport and energy –generated at least USD 4 billion globally in 2018.
The report’s analysis of six ocean-based industries (fishing, fish farming, fish processing, shipbuilding, maritime passenger transport, and freight shipping) shows that they contributed to more than 11% of GDP in lower middle-income countries and 6% of GDP in low-income countries in 2015, compared to less than 2% of GDP for high-income countries. In some low-income or island states, key ocean-based sectors like tourism can account for over 20% of GDP.
This reliance leaves developing countries highly exposed to the risks of deteriorating marine ecosystems, yet less than 1% of foreign aid is spent on conserving marine ecosystems and improving sustainability of ocean-related economic activities. The USD 3 billion in official development assistance (ODA) that was allocated on average to ocean activities annually over 2013-18 has tended to focus on expanding activities like ports or shipping without including efforts to improve sustainability.
Well-designed financing is essential to achieving sustainable ocean economies, yet data on ocean finance is scarce, and it is unclear how much of it contributes to sustainability. To help fill this gap, the report measures global development finance for the sustainable ocean economy and looks at private finance mobilised by ODA for ocean activities. It calls for environmental and social sustainability criteria relating to the ocean economy to be integrated into traditional financial services and investments, financial markets and credit markets.
Read the report Sustainable Ocean for All: Harnessing the benefits of sustainable ocean economies for developing countries.
Access the OECD platform on development finance for sustainable ocean economies
For further information, journalists are invited to contact Catherine Bremer in the OECD Media Office (+33 1 45 24 97 00).
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03/09/2020 – Governments have taken unprecedented fiscal action in response to the COVID-19 crisis, but countries will need to support economic recovery in the face of significantly increasing fiscal challenges, according a new OECD report.
Tax Policy Reforms 2020 describes the latest tax reforms across OECD countries, as well as in Argentina, China, Indonesia and South Africa. The report identifies major tax policy trends adopted before the COVID-19 crisis and takes stock of the tax and broader fiscal measures introduced by countries in response to the pandemic, from its outbreak to June 2020.
The report shows that while the size of fiscal packages in response to the COVID-19 crisis has varied across countries, most have been significant, and many countries have taken unprecedented action. It also points out that most countries have adopted a phased approach to COVID-19, gradually adapting their fiscal packages as the crisis has unfolded. Initial government responses focused on providing income support to households and liquidity to businesses to help them stay afloat. As the crisis has continued, many countries expanded their initial response packages. The most recent measures and discussions suggest that the recovery phase will be supported by expansionary fiscal policy in a number of countries.
With countries facing such high levels of uncertainty, policy agility will be key and targeted support measures should be maintained as long as needed to avoid scarring effects, according to the report. Once recovery is well underway, governments should shift from crisis management to more structural tax reforms, but they must be careful not to act prematurely as this could jeopardise recovery. “Right now, the focus should be on the economic recovery. Once the recovery is firmly in place, rather than simply returning to business as usual, governments should seize the opportunity to build a greener, more inclusive and more resilient economy,” said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration. “One path that should be urgently prioritised is environmental tax reform and tax policies to tackle inequalities”.
Rising pressure on public finances as well as increased demands for fairer burden-sharing should also provide new impetus to reach an agreement on digital taxation. “Tax co-operation will be even more important to prevent tax disputes from turning into trade wars, which would harm recovery at a time when the global economy can least afford it,” Mr Saint-Amans said.
Tax Policy Reforms 2020 also provides an overview of the reforms introduced before the COVID-19 crisis. It highlights continuation of a number of trends identified in previous years, including personal income tax reductions for low and middle-income households and the stabilisation of standard value-added tax (VAT) rates observed across many countries. Corporate tax rates have continued to decline, but at a faster pace than in 2019.
Areas where clear progress has been made include reforms to ensure the effective collection of VAT on online sales of goods, services and intangibles, and the adoption of measures in line with the OECD/G20 Base Erosion and Profit Shifting Project to protect corporate tax bases against international tax avoidance. On the other hand, progress on environmentally related taxes has been slow, with reforms being concentrated in a small number of countries and limited in scope.
The report also notes that there has been a marked change in property taxation compared to previous years, with an increase in the number of reforms in that area, generally aimed at raising taxes.
Media queries should be directed to Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration (+33 1 45 24 91 08), David Bradbury, Head of the Tax Policy and Statistics Division (+33 1 45 24 98 15 97), or Lawrence Speer, in the OECD Media Office (+33 1 45 24 79 70).
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Today, the Council agreed to add €6.2 billion to the EU 2020 budget to address the impact of the COVID-19-crisis and to fund inter alia the vaccine strategy. The Council adopted draft amending budget No 8 for 2020 by written procedure.
The revised budget increases payments for the Emergency Support Instrument (ESI) by €1.09 billion to ensure the development and deployment of a COVID-19 vaccine. The European Commission will use this money as a down-payment for pre-ordering vaccine doses.
Draft amending budget No 8 also increases payments by €5.1 billion for the Corona Response Investment Initiative (CRII) and the Corona Response Investment Initiative Plus (CRII+). The money will be used to cover the additional needs for cohesion funding forecast until the end of the year. The CRII redirects unspent money from the EU budget to tackling the COVID-19 crisis, whilst the CRII+ relaxes the cohesion spending rules to increase flexibility.
During its plenary on 14-17 September 2020, the European Parliament is expected to agree on its position on the draft amending budget proposal. Once there is an agreement, the draft amending budget will enter into force.
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By Kristalina Georgieva, IMF Managing Director, Washington, DC | As prepared for delivery
I would like to start by thanking Minister Freeland in her new role as Finance Minister. And my thanks to Finance Minister Clarke of Jamaica, and to Deputy Secretary-General Amina Mohammed.
I will focus my remarks today on two issues.
One, the outlook for the world economy. And two, the implications of this outlook for what we must collectively do.
On the outlook, since we last met in the end of May, incoming data paints a picture that is less bleak. In other words, we are seeing some signs of recovery in the world economy.
The outlook for a number of advanced economies is somewhat less bad than we anticipated. China has turned the corner and is recovering a little faster than anticipated.
And all of this is on the grounds of three important factors. First, a very strong and synchronized policy response by finance ministries, and by central banks.
A massive policy response put a floor under the world economy. This included $11 trillion of fiscal measures. And central banks have done miracles to inject huge amounts of liquidity and support their national economies and – through spillovers – the economies of other countries. We have seen it has become easier for emerging market countries with good fundamentals to raise money.
The IMF has been part of this very strong response. Never in our history have we done so much so quickly, supporting over 80 countries through emergency financing and also through our regular lending programs. We have now extended support of $270 billion – out of the Fund’s $1 trillion capacity – and more than a third of this support has been provided in recent months.
The second reason the situation is better is that the world has learned to function while the pandemic is still around us. We wear masks, we socially distance and we follow protocols.
And that has allowed some rebounds. We are seeing that non-contact-dependent activities like manufacturing are doing somewhat better than expected.
Third, there are improved results in testing and treatment. And we are very hopeful to have a vaccine. So, this is on the more optimistic side.
But it is not good or positive news everywhere.
The majority of emerging markets and developing countries – excluding China – are not seeing a reversal of fortunes yet. In fact, some would see a downgrade in our projections.
And, as we know very well, small countries with tourism-dependent economies are on their knees. Countries with high debt levels are in terrible trouble, and the virus is now moving to places where health systems are weaker.
What does that mean for us? I will focus on three priorities.
One, make sure that we maintain support until we see the economy turn around.
We project a recovery that is only partial and uneven.
We are at a point when we can say that the world economy will lose $12 trillion this year and next year.
To continue support in advanced economies, is somewhat easier. With low interest rates, it is more affordable.
For developing economies and for emerging markets with weaker fundamentals, we must all work to boost the financing that is available to them. All of us.
For the Fund, it means that we are expanding the use of existing SDRs, encouraging a shift from advanced economies towards developing economies so they can rely on strong financing capacity at the IMF on concessional terms.
Two, we have to be mindful of debt levels that are high in many emerging and developing economies – high to a point of suffocating capacity to act.
We have had the Debt Service Suspension Initiative — a great achievement. It has to be extended and both the World Bank and the IMF are calling for a one-year extension. And we are calling for greater private sector participation.
And we have to recognize that – for some countries – this is not going to be enough, and some countries will need a restructuring to bring debt down to a sustainable level.
I call for debt transparency as a priority. If we know debt levels, then this issue is much easier to handle.
Last – but not least – we need to recognize that this crisis is telling us to build resilience for the future.
That means investing in education, digital capacity and human capital – the health systems and the social protection systems. We need to make sure the other crises in front of us – like the climate crisis – are well integrated and addressed. And we need to prevent inequality and poverty – including gender inequality – from raising their ugly heads again.
To do this, we have to take care of taxation in a way that transforms and builds resilience for the future.
Yes, it is going to be hard. Everybody on the political side knows how hard this will be. But after the global financial crisis, we built resilience in the banking sector by reforming it.
Now, we have to do it for the functioning of our economies as a whole.
Thank you very much.
Compliments of the IMF.
The post IMF | Event of the Finance Ministers on Financing for Development in the Era of COVID-19 and Beyond first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by François Villeroy de Galhau, Governor of the Banque de France | Berlin Academy – Berlin, 10 September 2020
Ambassador DescôtesProfessors Schwan, Göring, Kaplan, Ladies and gentlemen,
I am very pleased to be with you today, despite the obstacles related to Covid. The Berlin Academy is one of the essential forums where Franco-German relations, which are at the heart of the European project, can be deepened over time. I am completely convinced of this. I am French, but my family’s roots are in Saarland. My family has lived there since the end of the 18th century and its ceramics manufacturing company Villeroy & Boch is part of the German “Mittelstand”. I love Germany, its language and its culture.
I’ve always been struck by a difference in terminology: the French speak, as romantics, of the Franco-German “couple”, and the Germans speak as engineers and use the term “engine”. But let’s set clichés aside: France also has excellent engineers, and romanticism was also born in Germany with Goethe, and Schiller. And above let’s all see the common reality.
We are experiencing, I believe, one of those “Franco-German moments” that will mark history, and we can now rightly celebrate it:  on 18 May, a Franco-German initiative on the European stimulus package; on 21 July, a historic agreement by the European Council in Brussels on a EUR 750 billion package, supported by a united Franco-German alliance; on 20 August, the Chancellor visited the President of the Republic in Brégançon.
Despite any fears, faced with the threat of the Covid crisis, Germany has clearly and unequivocally opted for Europe and the euro. However, in its early stages, the crisis appeared to distance us, due to our  different abilities to respond, and sometimes in different orders. Europe has once again demonstrated in this crisis that it is stronger than is commonly believed.
I will concentrate here on economic matters, because that is where my competence lies. Naturally, there are broader issues in Europe, that are concrete and emotional: those of our borders, our institutions, our military and diplomatic power, and, in a wider sense, our common identity, which is apparent to our fellow citizens. The President of the French Republic speaks of the necessary “European sovereignty”. I am aware that this expression gives rise to debate. In any case, it means that Europe must not passively put up with events, in the face of the growing rivalry between the United States and China. That we can and should be proud collectively of our achievements. In the economic sphere, these are the single market, the single currency, and our European social model – the soziale Marktwirtschaft. The world needs Europe, today. We must be decisive… and at the same time aware that economic rigour is a prerequisite for our political influence in this world of 2020 so fraught with danger. This brings me to what I want to say today. So far Europe has stood firm in the face of a shock of unprecedented severity: this will constitute the first part of my speech. And I will then address the following question: can reconstruction now strengthen Europe and the Franco-German alliance?
**
I.    So far Europe has stood firm in the face of a shock of unprecedented severity
Over the past six months, we have experienced a crisis of unprecedented proportions: the most serious that the European economy has endured since 1945. The European project has been subjected to a veritable full-scale – almost existential – “stress test”. But, to date, Europe has held firm. Europeans have an essential asset: their common social model based on social solidarity and organised public services. For instance, household purchasing power has been preserved overall, thanks in particular to short-time working measures. This is one major difference with the United States, where 22 million jobs were destroyed in a matter of weeks.
We know that the health shock has affected European countries to varying degrees, but the economic shock has been more symmetrical, due to the restrictive measures that ended up being substantial in all countries. GDP figures for the second quarter show that the recession is widespread, with double-digit percentage declines: -11.8 % in the euro area, -13.8% in France and -9.7% in Germany. Almost half of the differences between our two countries can be attributed to the construction sector, which has contracted much less in Germany, and more than half to the differences in methodology regarding public services statistics.
The European response to the health crisis was initially monetary, thanks to the rapid and decisive action of the Eurosystem. I attended the Governing Council today, and I will not comment immediately on our decisions that Christine Lagarde has just presented. In mid-March, when the economy was threatened by a breakdown in financing, the Governing Council of the ECB put in place an immediate and virtually unlimited liquidity shield. On 12 March, we acted first of all for businesses and SMEs that obtain financing from banks, by allocating them an exceptional refinancing envelope at a very attractive rate: the TLTRO III, which as of their first take up in June represented an amount of nearly EUR 1,350 billion. Then, on 18 March, for large companies and governments that fund themselves through the financial markets, we created the Pandemic Emergency Purchase Programme (PEPP), initially totalling EUR 750 billion, which was increased to EUR 1,350 billion on 4 June.
This massive and rapid action was welcomed but raised questions, particularly in Germany: is the ECB not going beyond its mandate, endangering price stability? And even more “fundamentally “, where do these thousands of billions created all of a sudden come from? I will start with the second question:  the specific feature of a central bank is its ability to create money virtually and without limits. However, it must be borne in mind that the money created by central banks is never simply “given away” permanently: it is loaned for a limited period; and it is channelled into the economy and eventually comes back to the central bank. The central bank can buy time through its monetary creation, and this is important. But it cannot sustainably increase wealth; only our work and economic growth can.
I will now return to the first question, on whether or not we are fulfilling our mandate. In its founding Treaties, and under the legitimacy afforded to it by economic actors and public opinion, the ECB’s measures are bound by two interlinked anchors: its price stability mandate and its independence. They are inherited from the Bundesbank and in my view vital. Independence : the ECB is subject to neither national governments, nor to the pressures of the financial markets nor of passing trends.
The ECB’s monetary policy must continue to support economic activity, for the sake of its own mandate of price stability. In the short and medium term, the crisis will have desinflationary effects that are already noticeable, with inflation temporarily falling in August by 0.2% in the euro area, and by 0.1% in Germany. For a year as a whole, we are expecting a slightly positive inflation of 0.3% in 2020 and 1.0% in 2021. As you know, we unfortunately remain well below our inflation target of “less than, but close to 2%”.
The other aspect of the response to the health crisis are fiscal measures, primarily at the national level. Germany clearly made greater use of the financial leeway it had built up since the 2009 crisis. Its fiscal stimulus package (as a percentage of GDP) is at this stage greater than France’s. The effectiveness of its stimulus package is still difficult to anticipate: in particular, the temporary reduction in VAT appears costly. The French government also announced a EUR 100 billion stimulus package last week. I wish to mention three positive features. It focuses on business supply and investment, and not household demand. This is fully justified, since households, protected by short-time working measures, except for the most vulnerable ones, will have saved nearly EUR 100 billion this year. This plan also has a strong focus on transformation, including ecological reconstruction – a third of the funds are allocated to this area.  Lastly, most spending is temporary and non-recurring, which will make it hopefully possible, once the crisis is over, to return to a sound and sustainable fiscal path.
II.    Can reconstruction now strengthen Europe and the Franco-German alliance?
After the emergency phase, the time has come to exit the crisis. We Europeans have common objectives here: to support growth during the recovery phase, but above all to invest for the future (climate change, digital, health, etc.), in a world that is increasingly uncertain. To achieve this, Europe has four concrete and innovative levers at its disposal: an unprecedented recovery plan, a Financing Union for private savings, its single market, and its commitment to fight global warming.
An unprecedented recovery planThe Franco-German initiative of 18 May, and the subsequent European agreement of 21 July, have been a major step forward for European financial solidarity. This is an unprecedented act of solidarity towards the countries most affected by a pandemic, which is itself unparalleled. For the first time, a common European-wide fund to finance final expenditure has been adopted, representing over half of the package (EUR 390 billion). This is not only a strong political signal, but also an economic rebalancing of the policy-mix in the euro area, which lays the groundwork for a real common fiscal policy. The ECB’s Governing Council has long advocated that monetary policy should not be “the only game in town” in Europe. This is very good news.
The commitment of the German leaders was decisive, but here too I hear questions from my German friends: “we are all for showing solidarity in this crisis, but might this not become the one-way transfer union that we fear?” No, because it is a common debt: Germany will hold 23%, but France too will hold 18%. No, because all our economies will benefit from the health of the other economies in the single market. And, no, because this “Next generation fund” must be the lever for the beneficiaries, starting with the countries of the South, to invest and reform for the future. And let’s rejoice in the fact that we have, no doubt, at last resolved the decade-long and fruitless squabble over the collectivisation of debts. Existing debts are, and will remain, the responsibility of national governments, and that’s the way it should be. Conversely, the future financing needs related to the recovery should be the natural ground in which financial solidarity is exercised, and hence a European bond.
A Financing Union for Investment and Innovation.Alongside the public – fiscal – risk-sharing mechanisms that tend to monopolise the debate, private risk-sharing mechanisms, which are less frequently considered, are just as important and effective. The euro area has an abundant resource at its disposal: a surplus of savings over investment which amounted to EUR 360 billion in 2019, making it the world’s largest pool of private savings. This resource is currently invested outside the euro area, although our potential investment requirements are significant. A better allocation of European private savings, however, requires more effective cross-border financing channels.
We therefore need to combine a more efficient Banking Union and an at last completed Capital Markets Union (CMU) to make a genuine “Financing Union for Investment and Innovation”. Jens Weidmann, the President of the Bundesbank, and I had made a strong case for it in a joint op-ed published in April 2019.
Reviving the single market, our essential assetThere is an essential asset that Europe does not talk about enough: it is its single market. Yet, this is its great economic success, together with the euro. But it is vital to remain vigilant as to the dangers of fragmentation with the Covid crisis. National governments acted appropriately during the critical phase, adopting emergency measures in particular to provide liquidity support to their businesses. But the single market means common rules for businesses: if this were not the case, the divergence between our economies could regrettably increase further. It is therefore necessary to quickly restore the Commission’s control over state aid and fair competition
Furthermore, we must revive the single market, above all because we can optimise its power by combining its various components much better: free movement of goods, naturally; but also the cross-border financing capacity with the financing Union; and last but not least, regulatory power. There are still too many implicit borders and too much fragmentation. We must use regulatory power to guide innovations – the example of the General Regulation on Data Protection (GDPR) -, have the courage to develop an industrial policy with public-private partnerships, as in the case of artificial intelligence and batteries, and make progress, for example, on Franco-German business law.
Climate change and carbon taxLastly, the ecological transition is clearly one of our common structural priorities and carbon tax is generally considered to be the most effective instrument to fight global warming. The European agreement of 21 July provides for the Commission proposing in the first half of 2021 a “carbon border adjustment mechanism”, accompanied by a “revised emissions trading system, possibly extending it to the aviation and maritime sectors.” The advantage of this solution is that it provides the European Union with a resource of its own and restores fair competition between European products and imported products that have a higher carbon footprint. The success of this instrument will depend on our negotiations at the WTO, and on its more extensive integration into European policies (transport, industrial policy, etc.).
**
Earlier I mentioned the difference in terminology between French and German: the French use “couple”, while the Germans speak of “engine”. But I will conclude by quoting a Frenchman, Clément Beaune, the new Minister for European Affairs, who I believe sums up the situation eloquently: “Celebration is necessary, but it is never enough and does not dispense with what has for six decades been the unique strength of the Franco-German relationship: a working relationship, organised at all levels of our political and administrative life, whose power stems from the fact that our two countries have indeed often divergent positions but know, at key moments, how to overcome them by involving others”.  Involving others is what we did in July 2019 with the appointments to the Commission and the ECB, and even more so this year in the face of the crisis. Together we have served Europe and Europeans well. We can be sure of one thing: they will still need our common commitment, on many ambitions and for a long time to come.
Compliments of the Banque de France. 
The post France and Germany facing European challenges in the crisis first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

EU countries lost an estimated €140 billion in Value-Added Tax (VAT) revenues in 2018, according to a new report released by the European Commission today.
Though still extremely high, the overall ‘VAT Gap’ – or the difference between expected revenues in EU Member States and the revenues actually collected – has improved marginally in recent years. However, figures for 2020 forecast a reversal of this trend, with a potential loss of €164 billion in 2020 due to the effects of the coronavirus pandemic on the economy.
In nominal terms, the overall EU VAT Gap slightly decreased by almost €1 billion to €140.04 billion in 2018, slowing down from a decrease of €2.9 billion in 2017. This downward trend was expected to continue for another year, though the coronavirus pandemic is likely to revert the positive trend.
The considerable 2018 VAT Gap, coupled with forecasts for 2020 – which will be impacted  by the coronavirus pandemic – highlights once again the need for a comprehensive reform of EU VAT rules to put an end to VAT fraud, and for increased cooperation between Member States to promote VAT collection while protecting legitimate businesses. The Commission’s recent Fair and Simple Taxation package (July 2020) also details a number of upcoming measures in this area.
Paolo Gentiloni, Commissioner for Economy, said: “Today’s figures show that efforts to shut down opportunities for VAT fraud and evasion have been making gradual progress – but also that much more work is needed. The coronavirus pandemic has drastically altered the EU’s economic outlook and is set to deal a serious blow to VAT revenues too. At this time more than ever, EU countries simply cannot afford such losses. That’s why we need to do more to step up the fight against VAT fraud with renewed determination, while also simplifying procedures and improving cross-border cooperation.”
Main results in Member States
As in 2017, Romania recorded the highest national VAT Gap with 33.8% of VAT revenues going missing in 2018, followed by Greece (30.1%) and Lithuania (25.9%). The smallest gaps were in Sweden (0.7%), Croatia (3.5%), and Finland (3.6%). In absolute terms, the highest VAT Gaps were recorded in Italy (€35.4 billion), the United Kingdom (€23.5 billion) and Germany (€22 billion).

Member State
VAT Gap %
VAT Gap (in €mn)
Member State

VAT    Gap %

VAT Gap (in €mn)

Belgium
10.4%
3,617
Lithuania
25.9%
1,232

Bulgaria
10.8%
614
Luxembourg
5.1%
199

Czechia
12.0%
2,187
Hungary
8.4%
1190

Denmark
7.2%
2,248
Malta
15.1%
164

Germany
8.6%
22,077
The Netherlands
4.2%
2,278

Estonia
5.2%
127
Austria
9.0%
2,908

Ireland
10.6%
1,682
Poland
9.9%
4,451

Greece
30.1%
6570
Portugal
9.6%
1,889

Spain
6.0%
4,909
Romania
33.8%
6,595

France
7.1%
12,788
Slovenia
3.8%
148

Croatia
3.5%
252
Slovakia
20.0%
1,579

Italy
24.5%
35,439
Finland
3.6%
807

Cyprus
3.8%
77
Sweden
0.7%
306

Latvia
9.5%
256
United Kingdom
12.2%
23,452

Individual performances by Member States still vary significantly. Overall, in 2018 half of EU-28 Member States recorded a gap above the median of 9.2%, though 21 countries did see decreases compared to 2017, most significantly in Hungary (-5.1%), Latvia (-4.4%), and Poland (-4.3%). The biggest increase was seen in Luxembourg (+2.5%), followed by marginal increases in Lithuania (+0.8%), and Austria (+0.5%).
Background
The annual ‘VAT Gap’ report measures the effectiveness of VAT enforcement and compliance measures in each Member State. It provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations.
The VAT Gap is relevant for both the EU and Member States since VAT makes an important contribution to both the EU and national budgets. The study applies a “top-down” methodology using national accounts data to produce estimations of the VAT Gaps. This year’s edition includes notable additions, such as a 20-years back casting exercise, an improved econometric analysis of the VAT Gap determinants and a projection of the potential impact of the coronavirus recession on the evolution of the VAT Gap.
Compliments of the European Commission.
The post VAT Gap: EU countries lost €140 billion in VAT revenues in 2018, with a potential increase in 2020 due to coronavirus first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission presents the assessment of the implementation and effectiveness of the Code of Practice on Disinformation. The assessment shows that the Code has proven a very valuable instrument, the first one of its kind worldwide, and has provided a framework for a structured dialogue between relevant stakeholders to ensure greater transparency of platforms’ policies against disinformation within the EU. At the same time, the assessment highlights certain shortcomings mainly due to the Code’s self-regulatory nature.
Věra Jourová, Vice President for Values and Transparency, said: “The Code of Practice has shown that online platforms and the advertising sector can do a lot to counter disinformation when they are put under public scrutiny. But platforms need to be more accountable and responsible; they need to become more transparent. The time has come to go beyond self-regulatory measures. Europe is best placed to lead the way and propose instruments for more resilient and fair democracy in an increasingly digital world.”
Thierry Breton, Commissioner for the Internal Market, said: “Organising and securing our digital information space has become a priority. The Code is a clear example of how public institutions can work more efficiently with tech companies to bring real benefits to our society. It is a unique tool for Europe to be assertive in the defence of its interests and values. Fighting disinformation is a shared responsibility, which the tech and advertising sector must fully assume.”
The Commission, assisted by the European Regulators Group for Audiovisual Media Services (ERGA), has been working with online platforms and advertising associations to monitor the effective implementation of the commitments set forth in the Code of Practice on Disinformation. The assessment of the Code covers its initial 12-months of operation. It brought positive outcomes. In particular, it increased platforms’ accountability and public scrutiny of the measures taken by the signatories to counter disinformation within the EU. However, the quality of the information disclosed by the Code’s signatories is still insufficient and shortcomings limit the effectiveness of the Code.
The assessment identified the following shortcomings:

the absence of relevant key performance indicators (KPIs) to assess the effectiveness of platforms’ policies to counter the phenomenon;
the lack of clearer procedures, commonly shared definition and more precise commitments;
the lack of access to data allowing for an independent evaluation of emerging trends and threats posed by online disinformation;
missing structured cooperation between platforms and the research community;
the need to involve other relevant stakeholders, in particular from the advertising sector.

Reports on actions taken to fight coronavirus-related disinformation
Since the outbreak of the coronavirus pandemic and ‘infodemic’, the Commission has set out a balanced and comprehensive European approach on coronavirus-related disinformation in the 10 June 2020 Joint Communication and has been in close contact with the platforms adhering to the Code of practice to ensure that its safeguards were effectively applied.
Platforms have shown that they can further improve their performance, when compared with what was achieved previously under the Code. Actions taken have led to concrete and measurable results, i.e. an increase in the prominence given to authoritative sources of information, and the availability of new tools to users to critically assess online content and report possible abuses. The crisis has also resulted in a stepping up of collaborations with fact-checkers and researchers and, in certain cases, the demoting or removing of content fact-checked as false or misleading and potentially harmful to people health.
Therefore, alongside the assessment of the Code of Practice, the Commission is today also publishing the first baseline reports on the actions taken by the signatories of the Code to fight false and misleading coronavirus-related information until 31 July. This includes initiatives to:

promote and give visibility to authoritative content at EU and Member State level. For example, Google Search gave prominence to articles published by EU fact-checking organisations, which generated more than 155 million impressions over the first half of 2020 and LinkedIn sent the “European Daily Rundown”, a curated news summary by experienced journalist, to close to 10 million EU interested members.

improve users’ awareness: Facebook and Instagram directed more than 2 billion people to resources from health authorities, including the WHO.

Detect and hamper manipulative behaviour: Twitter challenged more than 3.4 million suspicious accounts targeting coronavirus discussion.

Limit advertising linked to coronavirus disinformation to prevent advertisers from capitalising on them. All platforms have facilitated coronavirus-related ads from public health authorities and healthcare organisations.

Delivering on the Joint Communication, the Commission will gather, on a monthly basis, specific indicators from the platforms to monitor the effectiveness and impact of their policies in curbing the spread of disinformation related to the coronavirus pandemic.
Building both on the actions listed in the Joint Communication, and addressing the shortcomings identified in today’s assessment of the Code, the Commission will deliver on its comprehensive approach by presenting two complementary initiatives by the end of the year: a European Democracy Action plan and a Digital Services Act package. They will further strengthen the EU’s work to counter disinformation and to adapt to evolving threats and manipulations, support free and independent media, better regulate the digital informational space and upgrade the ground-rules for all internet services. A public consultation on the former is ongoing until 15 September while the consultation on the latter ended earlier this week.
Background
The assessment published today delivers on a specific action point of the December 2018 Action Plan against Disinformation, which charged the Commission to carry out a comprehensive assessment of the Code at the conclusion of its initial 12-month period of application. Online platforms signatories to the Code (Google, Facebook, Twitter, Microsoft, Mozilla and, as from June 2020, TikTok) committed to put in place policies aimed at:
(1) reducing opportunities for advertising placements and economic incentives for actors that disseminate disinformation online,
(2) enhancing transparency of political advertising, by labelling political ads and providing searchable repositories of such ads,
(3) taking action against,  and disclose information about the use by malicious actors of manipulative techniques on platforms’ services  designed to artificially boost the dissemination of information online and enable certain false narrative to become viral,
(4) setting up technological features that give prominence to trustworthy information, so that users have more instruments and tools to critically assess content they access online, and
(5) engaging in collaborative activities with fact-checkers and the research community, including media literacy initiatives.
The Code asked signatories, which include also trade associations representing the advertising industry, to report on the implementation of their commitments, based on annual self-assessment reports, and to cooperate with the Commission in assessing the Code. The assessment published today takes into consideration these annual self-assessment reports, a study carried out by an independent consultancy, Valdani, Vicari and Associates, a monitoring report carried out by European Regulators Group for Audiovisual Media Services (ERGA), and the Commission’s report on the 2019 elections.
Compliments of the European Commission. 
The post Disinformation: EU assesses the Code of Practice and publishes platform reports on coronavirus related disinformation first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Securities and Markets Authority (ESMA), the EU securities markets regulator, today publishes a Working Paper on Closet Indexing Indicators and Investor Outcomes.  The study finds that investors can expect lower net returns from closet indexers than from a genuinely actively managed fund portfolio. A summary of this study was also included in the Trends, Risks and Vulnerabilities report published on 2 September.
Closet indexing refers to the situation in which asset managers claim to manage their funds in an active manner while in fact tracking or staying close to a benchmark index. The authors of the study looked at annual fund-level data for the period 2010 to 2018, finding that investors saw both lower expected returns and higher fees when they invest in closet indexers compared with active funds. Overall, the net performance of potential closet indexers was worse than the net performance of genuinely active funds, as the marginally lower fees of potential closet indexers are outweighed by reduced performance.
Closet indexing is a practice that has been criticised by supervisors and investor advocacy groups on numerous occasions in recent years, over concern that investors are being misled about a fund’s investment strategy and objective and are not receiving the service that they have paid for.
ESMA and NCAs have worked to identify potential closet indexers by examining metrics on fund composition and performance and by conducting follow-up detailed supervisory work on a fund-by-fund basis. ESMA recognises that such metrics, while imperfect screening tools, are a useful source of evidence to help direct supervisory focus.
This study published today does not aim to identify particular closet indexers, but analyses how closet indexing relates to the costs and performance of EU-domiciled equity funds. In so doing, it aims to contribute to the understanding of closet indexing in the EU.
Compliments of the European Securities and Markets Authority.
The post Investors see lower net returns form potential closet index funds first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.