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Our Insights 8 Apr 2020

Mapping the state of play of sustainable finance products and services in Europe

By Anthea van Scherpenzeel

This article is co-authored by Anthea van Scherpenzeel, Consultant at SustainAbility and Mark Hoff, Partner at ERM and SustainAbility.

 

© Jamie Street on Unsplash

 

As the world combats with the current health and economic crisis, governments and businesses are committed to find opportunities for innovation and to build long-term resilience.

The COVID-19 pandemic has become a serious threat to global health and is disrupting our economies and investments throughout the world. In order to maintain and resuscitate the global economy, it is essential that global investment communities promote health, governance and environmental protection. In Europe, sustainable finance is gaining popularity and Environmental, Social and Governance (ESG) assets under management are growing. The European Union (EU) has placed strong emphasis on sustainable finance in order to support the transition to a low-carbon, more resource-efficient and healthy economy.

The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets (DG-FISMA) has appointed SustainAbility, an ERM Group company, in collaboration with Hindsight Consultancy, Institutional Investor Research, Minter Ellison and SRI-CONNECT, to undertake a comprehensive study to enhance the understanding of the state of play of the sustainable finance market. This study will allow the European Commission to understand the reliability and quality of sustainability assessments by third party providers, which in turn will help to reorient capital flows towards sustainable investment. The aim of the study is to:

  • Provide a state of play of sustainability-related products and services market;
  • Establish an inventory and classification of actors and sustainability product/services in the market;
  • Explore the use and quality of sustainability-related products and services;
  • Provide the European Commission with recommendations and best practices to stimulate demand and improve the quality of supply.

In the coming years, financial market participants will rely more on sustainability-related products and services (e.g. ratings, scorings, ESG data, benchmarks, research, etc.) that are offered by a number of specialist and traditional providers (e.g. non-financial rating agencies, data providers, benchmark providers, credit rating agencies, etc.) to assess climate-related risks and opportunities. However, there are concerns about the current state of play of the sustainability-related products and services market:

  • It remains costly for companies to reply to a very high number of ad-hoc requests from sustainability data and tools providers;
  • There is a lack of transparency on the proportion of data used, data collection process, and the methodology used by sustainability-related products and services providers, which makes it difficult to assess the robustness and reliability of assessment criteria;
  • Specialist providers and in-house providers are offering different methodologies, which results in a lack of comparable, reliable and clear results;
  • There is a potential issue of independence and the existence of conflicts of interests (e.g. when providers are assessing financial institutions that are also their clients).

In order to address these issues, we would appreciate your input. We invite providers of sustainability-related products and services and other actors in the sustainable finance sector to participate in this initiative through the online-survey or to contact us to be further involved.

To participate in the online survey click here.

For more information, please contact:  SustainabilityRatings@ERM.com

A message from the European Commission:

“The European Union is strongly supporting the transition to a low-carbon, more resource-efficient and sustainable economy. As part of the action plan on sustainable finance, the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets (DG-FISMA) has appointed SustainAbility, an ERM Group company, in collaboration with Hindsight Consultancy, Institutional Investor Research, Minter Ellison and SRI-CONNECT, to conduct a comprehensive study on Sustainability Ratings and Research. The results will feed into the work to implement the Commission’s sustainable finance action plan.”

Regions

Europe

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Research Survey

Providers of sustainability-related products and services and other actors in the sustainable finance sector are invited to complete this survey.

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