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European leaders believe reporting and partnerships can help finance sustainable development

Minds in Europe are increasingly focused on accelerating a green and just transition. But the key question is: how do we pay for it? A distinguished group of panelists from the world of banking, government and civil society came together at Financing the Future, a high level plenary at CSR Europe’s SDG Summit 2021, to discuss the topic.

“As a sustainability network, how can we work best to optimise this evolution of sustainable investment?” asked Stefan Crets, Executive director at CSR Europe. “And how can we make that transition be as inclusive as possible?”

The EC’s Commissioner for Financial Affairs, Mairead McGuinness, was clear on the direction needed. “We won't reach the next frontier of sustainable finance with public money alone. We need the private sector to play a leading role.”

Clear goals

It’s clear that Europe’s leaders are not lacking in ambition, and increasingly lead the world on sustainable finance.  Indeed, the EU’s European Green Deal Investment Plan (EGDIP) aims to mobilise at least €1 trillion in sustainable investments over the next decade.

Many European banks and investors are signatories to the UN-convened Net-Zero Asset Owner Alliance, a record-breaking network of 587 investors with US$46 trillion in assets under management. The alliance is urging governments to urgently implement measures including mandatory climate risk disclosure requirements.

But higher reporting standards present some businesses with challenges.

The first is the challenge facing some industries in their decarbonisation journeys. “Take for example the auto industry. Going from thermal propulsion to the electric world is a very different ecosystem,” said Hacina Py, Head of Impact Finance Solutions at Société Générale. “You will need infrastructure funds, sometimes new business models. We need to make sure we will have the right models in terms of regulatory capital.”

Hacina Py raised the prospect of some businesses being denied finance due to failures to meet ESG objectives. A transition asset ratio may be needed, she suggested, and initiatives to avoid a crunch on liquidity.

Technology for reporting

The second challenge is aligning companies’ often differing ESG reporting standards. The EU is leading efforts towards greater alignment with revisions to its Non-Financial Reporting Directive and its taxonomy of sustainable activities.

Technology can also play a vital role in bringing together the data that industries need to access finance. Across the complex estates and supply chains of large organisations, data providers often use proprietary methods when interpreting non-standardized and siloed data. This can cause companies, and their banks, to lack visibility on ESG criteria which can,  in turn, impact the availability of finance.

Solutions such as Tata Consultancy Services (TCS) ESG Integration Solution can help Banks Simplify their ESG Portfolio Constructions. Banks too, which are facing numerous challenges including digitalisation, can also benefit from enhanced agility and a more integrated ecosystem approach

 

 

 

Stronger together

Panelists also emphasised the vital role of partnerships to collectively deliver on sustainable finance and Sustainable Development Goals (SDGs), a priority TCS is focusing on at its Pace Port™ hub in Amsterdam.

“We need to work together to harness the full potential of sustainable finance,” said Caroline Wellemans, DG International Partnerships, European Commission. “There is no other way.”

Liina Carr, Confederal Secretary at the European Trade Union Confederation (ETUC) also emphasised the need to consider finance in terms of broader business investments and priorities - such as jobs. “We need to make sure that these investments also guarantee opportunities. We clearly need to increase the number of workers that participate in vocational education and training for example,” she said.

And despite progress made, Hakan Lucius at the European Investment Bank was clear on the scale of the challenge ahead. “We're doing a fair share and setting an example but it's clearly not enough.”

“We need more, and we need more public financing or private finance, and we have to do it together because the cost of inaction is unacceptable.”