EU fleshes out plan to finance transition to a green economy

The European Commission (EC) set out its refreshed vision on how to finance the transition to a sustainable economy with the publication of its strategy in July, building on its 2018 Sustainable Finance Action Plan.

In recent years, the Paris Agreement commitments to limit global warming have increasingly become embedded in public and regulatory policy. With the Covid-19 crisis drawing more attention to the link between biodiversity and ecosystem loss and pandemics, and greater focus on the consequences of environmental issues to the global economy, the need to transition to a sustainable economy is becoming a greater priority.

The financial services industry is key to this transition. Given the enormous cost of implementing the Paris Agreement — estimated to be between $3tn and $5tn per year — the sector has an important role to play in channelling the capital needed towards the transition. And as the financial services sector is so heavily regulated, and has a direct impact on both the real economy and consumers, it provides a useful lever for policy-makers looking to create significant change in a relatively short period of time.

You can read the full article published in The Banker on 4 August 2021.