Sustainable Finance

Featured - 4 items

EU ESG UCITS

Article 8 as a Middle Ground?

Mind the Gap

Principal Adverse Impact Statements in the AWM Industry

2024, ‘ESG-ise’ your Assets

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The ESG Opportunity in Europe

Growing your ESG business

These days it is hard to open the newspapers and not to come across an article that is about “sustainability”. Be it sustainability in the context of the financial services industry, the wider economy, or society at large. In recent years, sustainability has gained traction and is increasingly recognised as a necessity, not longer as a trend.

The debate on environmental issues and sustainable development dates back to the 70’s and the attention given to the topic has increased exponentially over the last decade, leading to a series of global commitments and initiatives that promote changes in the current institutional, economic and financial models.

On the global level, the year 2015 marks an important milestone in this regard as the 21st UN Climate Change Conference - better known as the Paris Agreement - took place and furthermore, during its 69th General Assembly, the UN presented its 2030 Agenda which sets out 17 sustainable development goals (SDGs) in order to tackle social, economic and environmental issues with the aim to promote prosperity while protecting the planet.

Today, the aforementioned two events are perceived as the main drivers for the EU Action Plan on Sustainable Finance (EU APSF). At the latest with the EU APSF, sustainability has found its place in the Financial Services industry.

Whichever role you have on the playing field of the financial markets, whether you are:

a Corporate looking to develop your sustainability strategy or to finance your next project;
a Product Manufacturer of financial products / - instruments trying to minimize the downside risk by incorporating sustainability risks in your due diligence;
a Distributor of financial products having to take into consideration clients’ preferences in terms of sustainable investing in order to cater their needs;
or an Investor looking to optimize the financial performance and the impact orientation of your portfolio.

In one way or the other, you will be affected and PwC can help you navigate through the “Sustainable Finance maze” and most importantly to turn the challenge into a business opportunity.

Find out more about the specific impacts that you might expect and how we can support you:

Corporates

The transition towards a sustainable global system starts from changes within the real economy. With the growing consciousness about global sustainability issues such as climate change, if businesses hope to attract and retain staff, investors and clients, they need to embrace the “Triple Bottom Line” which is people, planet and profit. Furthermore, corporates must pursue the inclusion and embeddedness of their sustainability strategy into their overall corporate strategy in order for sustainability to become an integral part of the business.

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Product Manufacturers

The impacts for manufacturers of financial products are spreading through the full value chain. The regulator targets the inclusion of ESG-criteria in the investment approach. This will require fund managers (UCITS & AIF) to re-design their investment process and to gather additional data on their investment targets.

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Distributors

For the wholesale/retail investors, the distributors subject to IDD or MiFID will ‘ask’ the investors about their preference to invest in a sustainable manner.

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Investors

To date, institutional investors have the highest potential in terms of sustainable investing and provide the largest contribution to the growing demand for sustainable financial products and services.

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The following figure provides a brief overview of the main goals and resulting actions of the EU APSF:

_{(source: EU Action Plan on Financing Sustainable Growth, 2018)}

Reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth

Establishing an EU classification system for sustainable activities
Creating standards and labels for green financial products
Fostering investment in sustainable projects
Incorporating sustainability when providing financial advice
Developing sustainability benchmarks

Manage financial risks, stemming for climate change, resources depletion, environnemental degradation and social issues

6. Better integrating sustainability in ratings and market researches

7. Clarifying institutional investors' and asset managers' duties

8. Incorporating sustainability in prudential requirements

Foster transparency and long-termism in financial and economic activity

9. Strengthening sustainability disclosure and accounting rule-making

10. Fostering sustainable corporate governance and attenuating short-termism in capital markets

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Our Common Future (“Brundtland Report”), 1987

This initiative is part of the broader efforts to connect finance with the specific needs of the European and global economy for the benefit of the planet and our society. The EU defines “Sustainable Finance” as the process of taking due account of environmental and social considerations in investment decision-making, leading to increased investments in longer-term and sustainable activities – whilst the plan recognises the key role of “Governance”, there is a clear focus on “Environmental” and “Social” considerations. The ten actions of the EU APSF do have major impacts on all participants of the financial market.

The EU has also defined further actions through the European Green Deal, which aims to make Europe climate neutral by 2050. In order to achieve this objective, regulators, corporates and financial players alike will be required to take further steps that will certainly impact their strategic and operational needs in the medium and long term.

However, complying with existing and upcoming regulatory requirements is not what sustainable finance is all about. Together with all the duties, there comes a chance for strategic development that might reshape the current business models of all market participants. Driven by an increasing demand, sustainable finance offers a series of strategic opportunities that allow for a repositioning and the creation of new fields of income.

How we can help

The points mentioned above, are only a small fraction of the countless practical challenges ahead of you. Here is how PwC can help you and your company to manage all the business needs and to find the proper fit for your company regarding your strategic positioning in the field of sustainability and sustainable finance.

Rationale - why is this relevant for you?

The EU Action Plan on Sustainable Finance leads to several new EU regulations and amendments of existing regulatory texts applicable to financial service providers
These will have far-reaching effects on the entire value chain of banks and asset managers and require significant implementation efforts
The new requirements add up to the existing ones, such as the Non-Financial Reporting Directive