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Getting honest about sustainability

The needle may slowly be moving, but if we continue at this pace sustainable finance will still be a niche rather than integrated into all finance by the end of the century.

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In December, the EU announced its green deal along with new rules for sustainable finance – the much-discussed ‘taxonomy’. Under the agreement, all financial products that claim to be green or sustainable will have to disclose exactly what proportion of their investments are environmentally friendly.

It’s going to be interesting – does this mean we will have more sustainable products or fewer? It’s hard to know because, at present, the data simply isn’t there to tell us where we are in the bid to direct capital to socially and environmentally supportive endeavours.

The numbers would convince us we’re making progress. According to research from the World Resources Institute (WRI), banks have pledged more than $2.5 trillion – but asked to drill down to put that in context, the WRI discovered a much starker picture. 

To start with, only 23 of the largest 50 banks have commitments, and those that have differ wildly in their definitions of commitments. On an annualized basis, these numbers look paltry compared to the traditional financial markets, which have no mandate to be environmentally or socially positive. The needle may slowly be moving; but if we continue at this pace, sustainable finance will still be a niche rather than integrated into all finance by the end of this century.

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