The EU is already providing impetus to help attract the required investments with the European Fund for Strategic Investments and other initiatives. The EU needs to invest approximately 350 billion Euro more every year during the 2021-30 decade than it did during the previous decade, in order to meet these 2030 climate and energy targets. The Commission presented on 17 September 20 climate target plan, with an increased emissions reduction target of 55% by 2030 as compared to 1990.
It will create the right environment – or ‘enabling framework’ – to facilitate and stimulate the public and private investments needed for the transition to a climate-neutral, green, competitive and inclusive economy. On 11 December 2019, the Commission presented the European green deal, a growth strategy aiming to make Europe the first climate-neutral continent by 2050.Īs part of the green deal, the Commission presented on 14 January 2020 the European green deal investment plan, which will mobilise at least €1 trillion of sustainable investments over the next decade. The Paris climate agreement, in particular, includes the commitment to align financial flows with a pathway towards low-carbon and climate-resilient development. In 2015, landmark international agreements were concluded with the adoption of the UN 2030 agenda and sustainable development goals and the Paris climate agreement. The European Union strongly supports the transition to a low-carbon, more resource-efficient and sustainable economy and has been at the forefront of efforts to build a financial system that supports sustainable growth. Sustainable finance will help ensure that investments support a resilient economy and a sustainable recovery from the impacts of the COVID-19 pandemic. It does this by channelling private investment into the transition to a climate-neutral, climate-resilient, resource-efficient and fair economy, as a complement to public money. Sustainable finance has a key role to play in delivering on the policy objectives under the European green deal as well as the EU’s international commitments on climate and sustainability objectives. Sustainable finance also encompasses transparency when it comes to risks related to ESG factors that may have an impact on the financial system, and the mitigation of such risks through the appropriate governance of financial and corporate actors. In the EU's policy context, sustainable finance is understood as finance to support economic growth while reducing pressures on the environment and taking into account social and governance aspects.
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The governance of public and private institutions – including management structures, employee relations and executive remuneration – plays a fundamental role in ensuring the inclusion of social and environmental considerations in the decision-making process. Social considerations could refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, as well as human rights issues. Environmental considerations might include climate change mitigation and adaptation, as well as the environment more broadly, for instance the preservation of biodiversity, pollution prevention and the circular economy. Sustainable finance refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects.
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