How will the EU’s SFDR sustainability rules work?
Europe’s action plan on sustainable finance will accelerate the mobilisation of green finance and reinforce EU leadership in this area by being an example for regulators across the world that are looking at a standardised approach.
Despite the challenges, the goal is to build a greener, more sustainable future, but it cannot be done without the weight of financial market participants being fully committed.
Today, country and corporate carbon reduction plans are still far short of the 1.5C target under the Paris agreement. There is a need for a further $1.6tn (£1.2tn) to $3.8tn a year to finance the energy transition.
What’s more, Covid-19 has exacerbated socio-economic inequalities. Private investment is needed to fund the transition to a climate-neutral and fair economy, complementing capital already committed by governments.
But mobilisation of the financial sector is underway. Cop26 saw 450 financial institutions, representing $130tn in capital, committing to transforming the economy and achieving net zero by 2050.
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