In recent years, especially since the adoption of the 2030 Agenda and the signing of the Paris Agreement in 2015, the integration of the SDGs in goals and in investment strategies it is an increasingly common practice. A trend determined by a growing awareness of governments and investors on the financial relevance of sustainability issues and on the central role of capital markets in supporting inclusive economic growth with a low environmental impact. Furthermore, i savers I am more and more interested to align financial choices with one’s own values or with environmental and social issues deemed important. This is what emerges from Position paper 2022 published by the working group ofASviS on sustainable finance.
Although the interest of governments, regulators, financial operators and savers has mainly focused on environmental issues, players, strategies and finance products for sustainable development consider the environmental, social and governance dimensions how deeply interconnected: in fact, – the document reads – phenomena such as climate change produce effects of both an environmental nature (e.g.: greater frequency and intensity of extreme atmospheric phenomena, drought, floods, etc.), and a social one (e.g.: climatic migrants, increased poverty and social tensions generated by famine and lack of primary resources) and their effective management is closely related to good corporate governance. With this in mind the action of finance for sustainable development is innervated by the concept of the “Just Transition”, according to which the transition to an economy with no impact on the environment requires support to the areas, sectors and subjects that are most exposed and vulnerable to change (e.g. active companies in the field of fossil fuels). If you are new to sustainable finance, read this article.
The process has begun but there is still much to do. In the coming years, according to ASviS the attention of stakeholders must focus out of 10 points. Let’s see which ones. (For more information see also the five golden rules for financial operators)
Financing the just transition
A fundamental element is correct and careful management of the transition process, even through a significant increase in resources for the so-called “Just Transition”. The balance between a rapid achievement of the climate neutrality objectives, an adequate technological progress for the adoption of techniques that favor the ecological and energy transition (in particular with reference to the sectors that produce energy and the impact of those that consume it ) and the maintenance of adequate levels of competitiveness of the country-system can be achieved – underlines ASviS – only through the intense, calibrated and adequate support of resources and certain times for the rapid and effective realization of the objectives of the transition. A possible solution could be a system of incentives commensurate with the achievement by companies of the decarbonisation objectives, possibly negotiable in a market with the assistance of a public guarantee.
Promote impact finance and sustainable investments
It is necessary to strengthen the set of adjustment tools to bring out in a clear and unequivocal manner the orientation of investors towards truly impactful projects on sustainability, ensuring that the Taxonomy Regulation actually selects investment projects based on their impact on environmental and social objectives. It is also necessary – adds the ASviS – enhance transparency of the SRI market and of contrast to greenwashing and, in particular, significantly improve the quality of data collection on financial products that genuinely finance sustainable and responsible investments.
Promote impact finance and taxonomy for social goals
The evaluation of investments must resolutely move towards the techniques of the so-called impact finance, associating financial objectives with social ones with a view to the collective sustainability of investment processes. The adoption of these techniques is not yet widespread and taxonomy acceleration for social goals sustainable development, which is becoming ever more urgent, – according to the Alliance – will be able to give a significant boost in this direction.
Change the business models of financial operators
It is necessary to give a significant acceleration to the changing business models of the actors of the financial system, strengthening on the one hand – the document reads – the processes of identification of ESG risks and their quantification in risk models, with the aim of increasingly inducing the financial system to reward sustainable production activities and, on the other hand, proposing to savers and SMEs sustainable financial products able to support consumption and production behaviors aligned with Goal 12 objectives.
Quickly adopt sustainability reporting directives
Sustainability reporting rules are undergoing profound changes, also with the aim of reducing the fragmentation of tools and standards. As soon as the refinement process is completed new directive on sustainability reportingit will be necessary – notes the report –proceed quickly with the adoptionand of the same at national level in order to speed up the transition to the new regulatory context. The speed of adherence to the directive and of application of the European standards as soon as defined, it will allow the business system and the financial system itself to adapt to the new context in a short time, accelerating the strategic choices of companies in the direction of sustainability. It will be needed at the same time manage possible diseconomies with caution deriving from an excessive weight on large companies deriving from the adoption of two different standards (European and international) and on small companies for the request for information that could derive from the banking and insurance world. In this framework – for ASviS – it seems urgent to encourage a robust process of acculturation of Italian SMEs in order to promote their resilience to the ongoing processes, especially in the relationships they will have with the financial world.
Consolidation of European public finance instruments for sustainability
From the European Green Deal onwards, also as a result of the current crises (health and energy), Europe has equipped itself with important public finance instruments in support of the transition towards a decarbonised and socially more sustainable economy. From the Next Generation EU to the new Structural Funds themselves, from Fit for 55 to RePowerEU, the objective of the European funds is to give the European economy a paradigm shift functional to the achievement of the Sustainable Development Goals. Six risk of energy crisis short-term involve the adoption of instruments not aligned with the objectives of climate neutrality, the prospect of long period can only be that of the use of the European budget, of common financing through common debt and of European environmental taxation aimed at achievement of the Sustainable Development Goals.
Use of the PNRR to develop planning skills in the PA
Il PNRR is a formidable tool for activate the Public Administrations on sustainable development issues. The need to think clearly taking into account the principle “Do not significant harm”, but also to give oneself quantifiable objectives in terms of the most important environmental and social dimensions, constitutes a important breakthrough within the framework of the processes public planning. It will be decisive – predicts ASviS – the ability to decentrare effectively these skills towards the local Public Administrations, also using the consolidated practices of the planning of Structural funds and attributing an even more significant content to the concertation processes. Delays on the Structural Funds must be quickly made up for by adequately redesigning the relationship between the center and the periphery in public spending planning.
Promote actions to strengthen finance for sustainable consumption
Despite the growing availability of financial products for retail customers attentive to sustainability put in place by banks and insurance companies, the collective awareness regarding the availability and importance of these products still appears very limited. Even in this context transparency and information are the two fundamental elements. The regulation is imposing growing obligations in this direction, but in a country where financial education is scarce, these processes are slow and can be accelerated with a collective commitment of market players to generate criteria for assessing the impacts of the multiple products of consumption, so that financial operators can link them with financial products to support that consumption.
Using regulation and the market to strengthen sustainable consumption
As underlined in the contributions of ASSOFIN, ANCE, FEBAF and FEDUF present in the report, the achievement of sustainability objectives in consumption is the result of the effect of regulation (information and transparency), incentives (superbonus), the promotion of cultural processes (financial education) andmarket action which, verifying the rapid change of consumption practices towards sustainable products, makes available financial instruments that transform the virtuous choice into a further element of convenience (not only economic).
Using finance to achieve the goal of gender equality
The adoption of an economic model oriented towards sustainability is bringing out the advantages of a society and an economy in which there are concrete equal opportunities for all and those structural gender imbalances that have conditioned economic development in recent decades are overcome. This objective – highlights ASviS – can be achieved with adequate policies that make policy evaluation tools available (gender budgets), but also operational financial instruments (e.g. resources for female entrepreneurship) which concretely promote accessibility to credit and the capital market. In this framework, a sustained training activity for women’s access to public and private finance instruments should be promoted both at the national level and at the level of the individual territories of the country.
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