The current crisis is making us understand how socio-environmental dynamics can influence the economy, and how sometimes they can be real threats.
Sustainable finance can help us prevent and limit these threats.
Sustainable finance is the application of sustainable development to the financial activities, and it aims to generate value in the long run by improving investments in firms with good performances and a very low impact on the environment. This is made possible by using Environmental, Social, and Governance criteria.
The application of sustainable finance can help recovering from the current crisis by working on the weaknesses that have contributed to its beginning: pollution, loss of biodiversity, and the lack of tools to protect people’s health.
Even without the Covid-19 emergency, it was clear that climate change and environmental deterioration were a big threat both for Europe and the world.
The aim of driving investments towards green businesses can be reached using the guidelines given by the European Green Deal, a program launched by the European Commission in 2019, whose aim is to create the first zero impact continent, through the transition towards a green economy and a new growth strategy that will make European Union more modern and competitive, targeting for a no greenhouse-gas emission in 2050.
With these assumptions, the green deal constitutes the roadmap that will lead the European Union towards a zero impact on climate in 2050, by promoting an efficient use of resources and the transition to a circular economy, in order to restore biodiversity and reduce pollution.
This goal will be reached by investing in environment-friendly technologies, improving industrial innovation, introducing green vehicles both in private and public transports, decarbonizing the energetic sector and making the buildings more efficient, with the prospective of touching all of our economy’s sector.
In Europe the recovery plans after the health emergency could be supported by sustainable finance tools and strategies, based on three criteria that can guide public and private investments:
- Ranking the company according to its compatibility with the Paris Agreements on sustainability
- Climatic benchmarks, which are indexes that can help to build a portfolio of investments with products that follow the guidelines of the Paris Agreements
- Green Bond Standards, a system of criteria on the emission of green bonds
To produce this change, enterprises, public and financial institutions must cooperate. The European Union is working to make it possible by trying to promote investments in renewable energy, sustainable transports, and energy efficiency. Another important point of this transition is digital innovation, which will play a key role, as well as improving financial education among people.
For sure the solution to the current crisis won’t be easy to find, but investing in green businesses and people’s health is part of it, and it essential to prevent similar situations to come up again.