Sustainable Finance: From voluntary initiatives to a
“Sustainable Finance is defined as the provision of finance to investments considering environmental, social and governance factors”1
If you have time to read, there are a lot of reports, guidelines, principles, regulations, and recommendations related to Sustainable Finance (SF) out there. Sustainable Finance is certainly a mainstream topic these days; the amount of publications available can be daunting.
Global bodies, regional working groups, local policy-makers and industry associations are rapidly developing initiatives to support and incentivize SF. A survey conducted by the Basel Committee (March 2020)2 suggests that ‘the majority of Basel Committee members (central banks and regulators) consider it appropriate to address climate-related financial risks within their existing regulatory and supervisory frameworks’.
Simultaneously, financial institutions are increasingly taking the stage. They are actively embedding their influence and channelling funds towards investments that deliver measurable non-financial benefits and long-term financial returns.
Below are just a few examples that illustrate the rapid development of SF-related initiatives:
What lies ahead?
In light of the ‘push’ by initiatives across the financial sector, and the ‘pull’ by societal players, the question on everyone’s mind is: How will the SF regulatory landscape evolve?
For now, the global initiatives remain voluntary. National policy frameworks are fragmented and mainly principle-based. It is the European Union that has taken the mantle and can be named as the absolute front-runner in the area of Sustainable Finance. The EU regulatory body is currently e sole regulatory body that has initiated binding regulations in this field. But there is more on the horizon.
More information and details on the EU Regulatory Developments will follow in our next Synechron “Knowledge Bytes” blog post.
Until then, if you would like to know more, please contact our Sustainable Finance expert team:
Rajul Mittal, Head of Sustainable Finance, Amsterdam