3 questions to smart minds
Photo: Dr. Gerhard Schwartz

“Sustainable Finance” — Megatrend or just Bureaucratic Effort?

For this 3 questions to Dr. Gerhard Schwartz

Photo: Dr. Gerhard Schwartz
9. Decem­ber 2020

The urgency to respond to global climate change has led to a push at the Euro­pean poli­ti­cal level for measu­res that are being pushed through the legis­la­tive process with vehe­mence. Due to the change in the Euro­pean Commis­sion and the procla­ma­tion of the “Euro­pean Green Deal”, this goal is being pushed forward with high prio­rity. — By 2021 at the latest, all finan­cial market parti­ci­pants and large compa­nies will have to address the issue of sustainability. 

For this 3 ques­ti­ons to Dr. Gerhard Schwartz, ARQIS

1. What, then, is the goal of the laws that are coming our way?

The objec­tive is to chan­nel finan­cial sector capi­tal into sustainable growth and mobi­lize it to address climate change. In addi­tion, sustaina­bi­lity conside­ra­ti­ons should also contri­bute to streng­thening finan­cial market stabi­lity, for exam­ple by taking them into account in risk manage­ment and capi­tal invest­ment processes.

The three goals are: Realig­ning capi­tal flows toward a more sustainable economy, embed­ding sustaina­bi­lity into risk manage­ment, and promo­ting trans­pa­rency and long-termism. Like a master plan, the EU Commis­sion defi­nes how sustaina­bi­lity conside­ra­ti­ons are to be incor­po­ra­ted into almost all areas of econo­mic acti­vity over the next few years.

2. So what chan­ges are affec­ting the finan­cial sector?

The entire orien­ta­tion compass of compa­nies close to the capi­tal market will have to realign itself. For exam­ple. rating agen­cies and bench­mark provi­ders will also have to incor­po­rate new sustaina­bi­lity conside­ra­ti­ons into their analyses.
In order to create the basis for uniform action, a common under­stan­ding of the term “sustainable” was first stan­dar­di­zed by the Taxo­nomy Regu­la­tion (Regu­la­tion (EU) 2020/852), which was finally adopted on June 18, 2020. It includes a uniform clas­si­fi­ca­tion system for deter­mi­ning which acti­vi­ties should be conside­red envi­ron­men­tally sustainable. Busi­ness acti­vi­ties are envi­ron­men­tally sustainable if, for exam­ple, they make a signi­fi­cant contri­bu­tion to achie­ving an envi­ron­men­tal goal or comply with a mini­mum level of protec­tion in terms of labor and human rights. 

The follo­wing six cate­go­ries are conside­red envi­ron­men­tal goals: Climate change miti­ga­tion, climate change adapt­a­tion, sustainable use and protec­tion of water and marine resour­ces, tran­si­tion to a circu­lar economy, pollu­tion preven­tion and control, and the protec­tion and resto­ra­tion of biodi­ver­sity and ecosystems.

3. And how should the corre­spon­ding data be coll­ec­ted? After all, they are proba­bly only available in a very incom­plete form.

This is still open so far. Espe­ci­ally since, also with regard to scien­ti­fic findings, corre­spon­ding evidence is certainly not available in every case, so that many ques­ti­ons of doubt will remain. There is comfort in the final requi­re­ment for evalua­tion crite­ria: These should be easy to apply and defi­ned in such a way as to faci­li­tate veri­fi­ca­tion of their compliance.

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