At Refinitiv, we believe in the need for collective, sustainable leadership to overcome the biggest environmental and social challenges the world faces. This also applies to sustainable finance.
Our role is to provide the world-class data, expertise, standards, risk products and analytics needed to drive sustainable finance; helping de-risk sustainable initiative investments and encouraging lending with environmental, social and governance (ESG) considerations as a core part of financial decision-making.
After all, data drives clarity and clarity drives decisions; no data imply drives opinions.
Sustainable finance is critical if the world is going to deliver on its key environmental and societal goals, such as the Paris Agreement and the UN Sustainable Development Goals (SDGs). It includes a range of products and initiatives, such as sustainable funds, green bonds, impact investing, micro-finance and active ownership.
The ultimate goal is transitioning to a low-carbon, resource-efficient, sustainable economy.
Currently the EU estimates there is approximately a 180 billion Euro annual investment gap needed to drive the UN 2030 agenda and Paris climate agreement in Europe alone.
This is one of the reasons Refinitiv has recently joined the United Nations Task Force on Digital Financing as a data partner. This task-force consists of leaders from a range of sectors from developed and developing countries, and is charged with harnessing the potential of financial technology to advance the UN SDGs – and ultimately close that investment gap.
Fundamentally, sustainable finance takes into account a triple bottom line; a framework including social and environmental impact alongside financial returns, as a true measure of success. It considers opportunity costs with an ESG lens, which is hard to measure and standardise.
The foundational pillars of sustainable finance are:
- Policy and governance: introducing regulation to re-orient capital towards sustainable investments, fostering transparency and disclosure, and mitigating sustainability-related risks in the financial systems.
- Taxonomy: establishing a common, dynamic standard for ESG investment activities.
- Disclosures: enhancing corporate disclosures to enable the development of sustainable financial products, e.g. adoption of a green bond standard to enhance transparency.
- Benchmarks: facilitating broader adoption and comparability in the market.
Refinitiv sits on the European Commission Technical Expert Group on Sustainable Finance, which is at the forefront of developing these core pillars.
Alongside the EU, China is also taking a lead here – the China Securities Regulatory Commission (CSRC), in collaboration with China’s Ministry of Environmental Protection, has introduced new requirements mandating all listed companies and bond issuers to disclose ESG risks associated with their operations by 2020.
ESG is now becoming a mainstream part of the data sets within the investment process, and credit rating agencies increasingly view risks through an ESG lens when they assess long-term outlook. Governance has traditionally featured in credit risk analysis but now there are new environmental and social factors being taken into account as well.
We’re moving from a one dimensional to a three-dimensional risk rating view. This is a big step in the sustainable finance ecosystem and further reinforces the triple bottom line concept.
Tackling the world’s environmental and social issues is the biggest challenge we all face and most organisations are not doing enough to shift how they operate, produce and consume. It needs collective action, from governments and global co-operation through to business practice and individual responsibility.
We launched a number of environmental and social pledges at Refinitiv last year, including reducing our annual carbon emissions by an average of 10% over the next five years, being powered by 100% renewable energy by 2020, committing to carbon neutrality in the same time-frame, and hitting our 40% women in leadership target. We also pledged to double our engagement with community investment programmes and recently signed up to the UN Global Compact, reaffirming our commitment to the UN SDGs.
From a sustainable finance perspective, transparent data and consistent standards alone aren’t the answer – data is just the beginning of the process – but they can help underpin the necessary shift in behavior needed to solve the world’s environmental crisis.
To find out more about how Refinitiv’s suite of products can help corporations drive sustainable leadership, and investment firms meet sustainable investment mandates, go to refinitiv.com/sustainability.