Sustainable Finance: Promoting Environmental, Social, and Governance Investments

An Overview of Sustnable Finance

Sustnable finance is a process by which financial decisions are made while considering environmental, social, and governance ESG factors. This approach promotes long-term investments in sustnable economic activities and projects. Environmental considerations encompass issues such as climate change mitigation and adaptation, biodiversity preservation, pollution prevention, and the circular economy. Social aspects might refer to inequality, inclusivity, labor relations, investment in people's skills, communities, rights concerns, and institutional management structures including executive remuneration.

In the European Union's policy context, sustnable finance is about supporting economic growth while reducing environmental pressure towards achieving climate and environmental objectives set out under the European Green Deal. It also encompasses transparency regarding risks related to ESG factors that may impact financial systems, mitigating such risks through proper governance of both financial and corporate actors.

The significance of sustnable finance lies in its pivotal role in delivering on policy goals within the European Green Deal and international climate and sustnability commitments. By channeling private capital into a low-carbon, resource-efficient, and sustnable economy as a complement to public funds, it ensures resilient economic growth and supports recovery from the impact of the COVID-19 pandemic.

The EU has taken a leading role in fostering a financial system that fosters sustnable development and transition finance is essential for reducing current high greenhouse gas emissions or environmental impacts while moving towards a climate-neutral and sustnable economy. Companies with diverse starting points seeking to become more sustnable often require financing for their journey, which can involve using existing technologies or developing new ones.

On June 13th, 2023, the Commission issued non-binding recommations on how companies could voluntarily utilize EU sustnable finance tools for transition finance. The EU's toolbox supports businesses of all sustnability records and provides proportional support to smaller firms seeking to fund their transitions.

Further information about ongoing initiatives such as studies on biodiversity risks or legislation on environmental, social, and governance ESG ratings can be found below:

• Monitoring of climate-related risks to financial stability

• Biodiversity study for methodological framework assessment

• Political agreement on ESG ratings

The Commission has established platforms like the Platform on Sustnable Finance and expert groups including the Member States Expert Group on Sustnable Finance, Technical Expert Group on Sustnable Finance TEG, and the High-level Expert Group on Sustnable Finance to guide its work in sustnable finance.

For more resources or updates related to sustnable finance, visit these EU websites:

• Director-General John Berrigan's Office

• EU Finance Podcast

• Financing Sustnability Strategic Note from the European Political Strategy Centre

Stay connected with us through social media channels for regular updates.

In addition, partner resources are avlable including IT vulnerability reporting and language settings on our sites.

We look forward to your participation in creating awareness about sustnable finance practices and promoting green investments.

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