The global financial crises and responses to them led to a transformation of the financial landscape which changed the behavior of the banking sector which greatly hampered the willingness of banks to take on long-term financing in connection with global de-risking.
Global energy infrastructure needs and the increasingly pressing challenges and risks associated with climate change present the world with an unprecedented investment opportunity related to the transition to a low-carbon climate resilient (LCR) economy. Making sure that the investment capital is reallocated from high-carbon to low-carbon will involve strategies for closing the financing gap which need to consider a policy regime that establishes price incentives and policy coherence and significant regulatory constraints faced by traditional sources of financing for green infrastructure (involving governments and corporate actors).
The High Level Group on Sustainable Finance (HLEG) set up by DG Fisma at the European Commission, is looking into whether and how the financial system can enable capital reallocating consistent with the “green” transition and for the long run (by providing financing for companies and industries that protect and improve the environment and shifting financing away from fossil fuel industries and environmentally harmful activities). It is only through such a reallocation that the infrastructural foundations of the global economy can be rewired to be consistent with keeping the global temperature increase to well below 2 degree Celsius, as called for under the Paris Agreement.
As highlighted in the Capital Markets Union Mid-Term review, last June, sustainable and responsible investment (SRI) is at the core of this transformation. The measures that will be put in place to improve ESG integration and guarantee increased transparency will have a serious impact on the investment mandates of institutional investors and asset managers.
This roundtable discusses the consequences and impact on the financial system, the implication for businesses and the regulatory framework. What can investors expect and how they can prepare?
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