As 2023 prepares to be a pivotal year for sustainable finance, this blog explores key topics that will help shape the industry now and in the future.
- What five topics will shape the sustainable finance agenda for 2023 and beyond?
- Regulations, wider climate considerations and greenwashing come under intense scrutiny.
- Data will continue to be an important part of the world’s sustainable financial journey.
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LSEG is dedicated to addressing the world’s most pressing challenges and enabling sustainable growth for the global economy. That is why we are focusing on the permanent convergence of sustainability and finance, starting 2023 with a view to several topics that will shape the sustainable finance agenda next year.
Complexity – it gets worse before it gets better
Sustainable financial regulations, disclosure standards and guidelines, fragmented initiatives and definitions used are constantly evolving.
We’ve talked at length about the importance of convergence in this highly fragmented space, and there are many promising developments. But I think it will take some time before we get to the bottom of this issue and can simplify it in the context of the financial sector.
Recommendation: ISSB, SEC and EU policymakers should coordinate their digital tagging efforts on guiding principles and indicators and sustainability disclosure rules.
Learn more about how LSEG can help you in your quest for sustainable growth
Nature enters the conference room – the new elephant in the room
It is estimated that half of the world’s GDP depends on natural capital. However, most of these costs are not included in financial accounting, risk management, or business valuation.
Moreover, the climate crisis cannot be solved without nature.
Biodiversity has long been ignored by capital markets. However, this is no longer the case, and with the global agreement reached in Montreal at COP15, the topic is now at the forefront of sustainable finance.
I expect the definition of natural KPIs and disclosure requirements to accelerate. Increased data availabilitymaking nature-themed financial products and solutions more popular.
Recommendations: TNFD’s final recommendations, scheduled for September 2023, and the ISSB’s engagement with TNFD and collaboration with insurance companies will accelerate solving the natural data challenge.
The cost of decarbonisation – how much will you charge?
Currently, many companies know little about the costs of decarbonisation. Many players have yet to measure and quantify their price tag when it comes to hitting their net-zero target.
Scale and pricing for decarbonizing businesses will be paramount next year as challenges such as energy costs continue to be relevant.
Recommendation: Combine short-term and long-term costs and benefits to get the big picture. The price of carbon is a commodity of the future.
Re-evaluate claims, terms and labels – if you can’t prove it, you shouldn’t say it
Political and litigation risks are forcing companies to reassess their ESG claims, product labels, and public statements.
The financial industry is at a very fine line that is not clearly defined when it comes to classifying a fund as a Section 6, 8 or 9, becoming a member of the NZAOA, or calling an investment strategy ESG. is essential and at risk. business to do.
Recommendation: Global Definitions, Terminology and Transparency.
Transition finance – accelerating decarbonization
Significant transition finance is needed to accelerate decarbonization and the activation of strong transition plans as the world begins to fully understand the costs of nature and climate change.
Sustainability-related and transition bonds have grown significantly in the EU and China, renewing debate about the need to introduce a transition taxonomy.
Recommendation: Facilitate clear migration planning guidance focused on disclosure templates that enable standardization of data.
At LSEG, we believe that only a permanent marriage of finance and sustainability can help us effectively address the world’s most pressing challenges and strategically enable sustainable growth.
Learn more about how LSEG can help you in your quest for sustainable growth
