Posted on July 26, 2022 In recent years, sustainable finance has grown strongly, hand in hand with the UN Sustainable Development Goals (SDG) and the 2030 Agenda, which require an annual investment of 6 billion dollars, to what is necessary is the participation of the private sector. But really, what are they and how are they regulated? Sustainable finance is the tool to align the economy with environmental and social responsibility. In short, to combine money and the commitment to good practices, as a catalyst to achieve the objectives of the SDGs and the 2030 Agenda. These sustainable finances have the objective of promoting economic models in companies that favor respect for the environment, human rights rights, social justice and good corporate governance. There are several examples such as Investment Funds that apply ESG criteria, Solidarity Investment Funds, Green and Social Bonds, etc. However, while sustainable funding has reached record levels, action still falls short of what is needed.
How to invest in sustainable finance?
People who are interested in investing under criteria of responsibility and ethics have before them a good range of options: from traditional asset management products to SRI funds, pension plans and green and social bonds, among others. In all cases, it is a matter of financing companies with ethical criteria, that care for the environment and that have programs committed to society and their environment, while also being respectful of the rights of workers or defenders of equal pay.
How is sustainable financing regulated?
At a European level, we find the European Union (EU) Action Plan on Sustainable Finance and its three reference acronyms (SFDR, NFRD and EU Taxonomy).
NFRD is the EU legal framework to regulate the disclosure of non-financial information by corporations. It was adopted in 2014 and establishes that companies must report on ESG information from 2018.
SFDR is the new EU regulation that introduces rules for market participants and financial advisers to report on how they account for sustainability risks. SFDR applies at the “entity level” (i.e., requiring Financial Institutions to report on how the entire organization manages such risks) and also at the “product level” (i.e., requiring companies to report on how their financial products are affected by such risks). The regulation requires all market participants and financial advisers to report sustainability risks, even if they do not offer ESG-related products. The regulation of TAXONOMY of the EU reflects a common European classification system for environmentally sustainable activities. Basically, the Taxonomy tried to answer the question: What can be considered an environmentally sustainable activity? Answering this question is essential for investors to avoid “greenwashing”, i.e. a situation in which financial products are marketed as sustainable without meeting sustainability criteria. The Taxonomy defines six environmental objectives, and defines an economic activity as sustainable if this activity contributes to at least two of these objectives without, at the same time, significantly harming any of the other objectives. What is certain is that we will witness a large number of technical specifications of the three regulations over the next few years. From Globalcaja’s Public Aid Technical Office we would like to accompany you in the transition process towards a greener production model, for this reason we offer you financing under preferential conditions for the development of this type of initiative and the consulting firm’s team of specialists Euro-Funding to advise you on everything related to Sustainable Finance. INFORMATIONTitleDiscover what sustainable finance is and what it is forDescriptionIn recent years, sustainable finance has grown strongly, hand in hand with the UN Sustainable Development Goals (SDG) and the 2030 Agenda, which require an annual investment of 6 billion dollars, for which the participation of the private sector is necessary. Author GLOBALCAJA
