Global developments in sustainable finance
Sustainable-finance developments have accelerated globally over the past 12 months as the urgency required to tackle climate change effectively is increasingly factoring into market participants’ thinking.
Europe has long been a market leader in sustainable finance. The final report of the EU sustainable-finance taxonomy was released last year and is currently proceeding into legislative state, while at the same time more definitions are added in a wider range of sectors.
Eila Kreivi, director and head of capital markets at European Investment Bank in Luxembourg, told the KangaNews conference that the International Platform for Sustainable Finance, set up by the European Commission in 2019, put in place a working group for taxonomy harmonisation with other jurisdictions led by the EU and China.“The working group is not trying to implement the taxonomy’s rules everywhere but it is trying to establish a similar kind of architecture that would make the market more comparable across borders,” Kreivi said.
In late June, the European parliament also approved the European climate law.
The executive order on tackling the climate crisis issued in January made clear that the Biden administration intends to use existing regulatory procurement and budgetary powers to make climate change action a priority in domestic and foreign policy.
In addition to the goal of climate neutrality and an aspirational goal for the EU to strive to achieve net-negative emissions after 2050, the law sets a binding target of a reduction of net greenhouse-gas emissions by at least 55 per cent by 2030 relative to 1990. This further tightens decarbonisation targets, Kreivi said.
Joe Biden taking over as US president at the start of 2021 has been another pivotal moment in changing the global policy and regulatory landscape regarding climate change, and sustainability more generally, according to Mike Wilkins, managing director, sustainable finance at S&P Global Ratings in London.
The US had been lagging global progress, but the Biden administration has reignited the US’s commitment to tackling the climate crisis including by re-joining the Paris Agreement and publicly announcing executive orders and plans to develop more policy.
“The executive order on tackling the climate crisis issued in January made clear that the Biden administration intends to use existing regulatory procurement and budgetary powers to make climate change action a priority in domestic and foreign policy,” Wilkins suggested.
He also cited the launch of the Taskforce for Nature-related Financial Disclosures (TNFD) – modelled on the Taskforce for Climate-related Financial Disclosures – as evidence of increasing understanding of sustainability.
The TNFD has a mandate to come up with recommendations by 2023. “We are going to see even more focus on nature, biodiversity and natural capital going forward. These factors are going to be up there with climate change in importance on the financial community’s agenda,” Wilkins said.
