Green and Social Economy Finance

A Review

Karen Wendt, Karen Wendt

• Publisher: CRC Press
• Year: 2021
• ISBN:
  9781000220025
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Nachhaltigkeit im Unternehmen

Green and Social Economy Finance is a compilation of chapters by experts, linking research and practice. This anthology provides a new thinking on social economy green finance, showing emerging themes and trends. It spans from stock markets, green finance, innovations, digitalization to social finance, governance and theories of change. It concentrates on impact, opportunity recognition and development of financial products designed to finance the green and social economy. Without the attraction of capital, social entrepreneurship, and innovations, green finance can face difficulty in addressing business solutions. Green and social economy is a nascent field. The authors address the conceptualization of green and social solutions and identify new trends in the finance industry products and approaches. The book demonstrates that aligning finance and investment with the Paris Agreement, sustainable development goals and needs and interests of society are feasible.

International Management Frameworks and Governance

Chapter 1
Is the EU Action Plan for Sustainable Finance A Game Changer?

Karen Wendt

Introduction

Major private and public investments are needed to transform the EU economy to deliver on climate, environmental and social sustainability goals, including the Paris Agreement and the UN Sustainable Development Goals (SDGs). Sustainable finance makes sustainability considerations part of financial decision-making (i.e., Management Systems and Decision Frameworks). One of the options the EU has chosen is to create a taxonomy of green investments and transition technologies. This taxonomy can serve as framework for investors. Investors will need to report to what extent their investments are taxonomy compliant. Also the EU considers creating two low carbon benchmarks to guide investors towards low carbon investing.

In the context of the EU initiatives, the EU has specified and clarified what sustainable investment means. Sustainable investment in the EU is defined as an economic activity contributing to the achievement of a particular environmental¹ or social objective² on the condition that the investment does not significantly harm any other environmental or social objective. In addition, the investee company/ asset is expected to follow good governance practices, in particular, with respect to sound management structures, employee relations, remuneration of staff and tax compliance (EU Action Plan).

¹ Environmental objectives are expected to be measured, "for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emission, or on the impact on biodiversity and the circular economy." Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial seivices sector (Text with EEA relevance), OJ L 317, 9.12.2019, p. 1-16, Article 2(17).

CEO Eccps Impact GmbH, Alte Steinhauserstr. 1, 6330 Cham, Switzerland https://eccosintemational.io/.

Social objectives are those that contribute "to tackling inequality, that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically and socially disadvantaged communities." Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (Text with EEA relevance), OJ L 317, 9.12.2019, p.1-16. Article 2(17).

The EU definition therefore is aligned with the term "responsible business conduct" (RBC) championed by the Organisation for Economic Co-operation and Development (OECD), which has issued several sector-specific RBC due diligence guidelines that are being embraced by regulators as relevant standards.³ The most noteworthy of these standards are the OECD Multinational Enterprise Sector Guidelines (in short MNE Guidelines).⁴

³ See EU Commission (2019): Best available Technique Reference documents (BREF Documents) available at https://eippcb.jrc.ec.europa.eu/reference.

⁴ See, for example, the adoption of the OECD's Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict and High-Risk Areas, which is understood by the US Securities and Exchange Commission as an internationally recognized due diligence framework as described in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act or the OECD's Responsible Business Conduct for Institutional Investors: Key Considerations for Due Diligence under the OECD Guidelines for Multinational Enterprises, which has been seen as a major guideline to be ob- served by ESAs when drafting regulatory technical guidance under the EU's Regulation on Sustamability-Related Disclosures in the Financial Services Sector.

Figure 1: Sustainable Investment (as defined by the EU).

The EU also provides a definition of sustainability risks. This definition also enjoys a broader scope than usual in the financial sector. The definition describes sustainability risk as an "environmental, social or governance eve...