RESULTS AND SCORES

Spain

Enabling Environment

The enabling environment of Spain has room for improvements. Although having ambitious targets for decarbonisation, Spain fails to provide a clear transition pathway with a long-awaited Climate Change and Energy Transition that is still pending.

The 3fP-Tracker shows that public incentives for green finance are driven by regional and local entities. At the national level, only the Institute for Energy Diversification and Savings provides subsidies for wind and solar energy and SMEs with green projects. Spanish public institutions are also solid participants of the green bond market with public sector emitting green bonds since 2017. A green bond scheme is under reflexion in the ministry of Economy and the Spanish Treasury. However, Spain could benefit from climate-related disclosure and the integration of ESG criteria into the portfolio management of its public institution (Seguridad Social, Bank of Spain, etc.).

Supervision, Risk Management & System Stability

The supervisory environment in Spain could be further developed. Awareness on climate-related risks is rising with several public institution offering conferences, seminars and publications on this topic.

Further progress on risk management is expected since the draft Law on Climate Change and Energy Transition, includes mandatory risk assessment on climate change every two years for the Bank of Spain, CNMV and the General Directorate of Insurance and Pension Funds. Frameworks for risk management for banks, insurance companies, pension funds and asset managers do not explicitly mention climate change or climate change related risks. However, insurance companies have to disclose environmental information in the abbreviated report as stipulated in the Royal Decree 1060/2015.

Transparency and Disclosure

Transparency on climate-related risks and opportunities in the Spanish regulatory environment for financial markets could still be further developed. Currently, EU Directives are the key driver to change the status quo. Although climate change is never explicitly mentioned, climate-related reporting and disclosure on strategy are partially covered in both the Spanish Corporate Governance Code and the Spanish Corporate Act – Law 11/2018 (Ley sobre información no financiera y diversidad). The disclosure of metrics and targets to assess climate-related risk and the company’s contribution to climate change is mandatory for those defined as “public interest entities”

The transposition of the Shareholder Rights Directive II (EU Directive 2017/828) into Spanish regulation (still pending) will reinforce long-termism in the economy. Institutional investors and asset managers will have to publish a Shareholder Engagement Policy compliant with transparency requirements on ESG factors. Adoption of a long-term vision is also fostered with executive remuneration partly linked to the medium-term success of a company.

  • TRANSPARENCY & DISCLOSURE

    Transparency on climate-related risks and opportunities in the Spanish regulatory environment for financial markets could still be further developed. Currently, EU Directives are the key driver to change the status quo. Although climate change is never explicitly mentioned, climate-related reporting and disclosure on strategy are partially covered in both the Spanish Corporate Governance Code and the Spanish Corporate Act – Law 11/2018 (Ley sobre información no financiera y diversidad). The disclosure of metrics and targets to assess climate-related risk and the company’s contribution to climate change is mandatory for those defined as “public interest entities”

    The transposition of the Shareholder Rights Directive II (EU Directive 2017/828) into Spanish regulation (still pending) will reinforce long-termism in the economy. Institutional investors and asset managers will have to publish a Shareholder Engagement Policy compliant with transparency requirements on ESG factors. Adoption of a long-term vision is also fostered with executive remuneration partly linked to the medium-term success of a company.

  • SUPERVISION, RISK MANAGEMENT & SYSTEM STABILITY

    The supervisory environment in Spain could be further developed. Awareness on climate-related risks is rising with several public institution offering conferences, seminars and publications on this topic.

    Further progress on risk management is expected since the draft Law on Climate Change and Energy Transition, includes mandatory risk assessment on climate change every two years for the Bank of Spain, CNMV and the General Directorate of Insurance and Pension Funds. Frameworks for risk management for banks, insurance companies, pension funds and asset managers do not explicitly mention climate change or climate change related risks. However, insurance companies have to disclose environmental information in the abbreviated report as stipulated in the Royal Decree 1060/2015.

  • ENABLING ENVIRONMENT

    The enabling environment of Spain has room for improvements. Although having ambitious targets for decarbonisation, Spain fail to provide a clear transition pathway with a long-awaited Climate Change and Energy Transition that is still pending.

    The 3fP-Tracker shows that public incentives for green finance are driven by regional and local entities. At the national level, only the Institute for Energy Diversification and Savings provides subsidies for wind and solar energy and SMEs with green projects. Spanish public institutions are also solid participants of the green bond market with public sector emitting green bonds since 2017. A green bond scheme is under reflexion in the ministry of Economy and the Spanish Treasury. However, Spain could benefit from climate-related disclosure and the integration of ESG criteria into the portfolio management of its public institution (Seguridad Social, Bank of Spain, etc.).

Transparency and Disclosure

Common disclosure framework27%
27%
Investor's fiduciary duties40%
40%
Consumer transparency13%
13%

Supervision, Risk Management & System Stability

Supervisory authority positioning40%
40%
Regulation/Supervision of banks40%
40%
Regulation /Supervision of insurance companies40%
40%
Regulation /Supervision of pension funds43%
43%
Regulation /Supervision of asset management and investment funds40%
40%

Enabling Environment

Common green taxonomy0%
0%
Supporting green finance with public incentives54%
54%
2-Degree consistency of public sector acting38%
38%
Public capacity building and awareness on green finance35%
35%
Green public-private initiatives of financial centers40%
40%

Although awareness for green finance in Spain is rising, political framing is timid and progress beyond the translation of EU regulations is slow. In theory, Spanish action on green finance and green financial market regulation should be much stronger according to the country’s climate action plans. The political deadlock of the Spanish government has hindered progress in the past years. This is reflected in the 3fP-Tracker dimensions, as Spain remains the least advanced of the assessed countries.

However, further regulation of sustainable finance is expected in the coming years with the transposition of several EU directives including the IORP II Directive (EU Directive 2016/2341 and the Shareholder Rights Directive II (EU Directive 2017/828), the implementation of the Law on Climate Change and Energy Transition, the preparation of a strategic Agenda for Sustainable Finance and the issuance of a sovereign green bond. The hosting of the COP25 in Madrid could provide a new push for green finance in Spain.

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