How’s sustainable finance doing within policy uncertainty and the anti-ESG wave?

February 16, 2024
1 min read

The demand for sustainable finance is growing rapidly – but will that growth be stunted by economic headwinds, greenwashing fears and the US’s ‘war on ESG? edie asks Investec’s UK head of sustainability Rishi Madlani to weigh in.

Private finance will need to do the heavy lifting to close a multi-trillion-dollar gap in sustainable finance. However, most large financiers have lax deforestation policies and almost nine in ten financial institutions are not identifying and assessing human rights in financing activities. While firms are making incremental moves towards sustainability, bold change is needed.

UK finance sector has made considerable advancements in driving global conversations and progress toward sustainable action, such as implementing financial risk disclosures aligned with TCFD. However, a key domestic framework, the UK’s Taxonomy, is still outstanding and needed to mitigate the risks of greenwashing.

A taxonomy could help the UK set itself apart from the backlash against ESG considerations in finance, particularly in the US, where Republican politicians are critical of ESG. A taxonomy is needed to show a long-term direction of travel and invigorate the market for sustainable finance.

Private financiers need to collaborate with governments and clients to develop and implement sustainable policies and practices. Governments must provide transparent plans aligned with achieving net-zero emissions and necessary public finance to catalyze private capital.

Financial institutions can lead by example by reducing their own carbon footprint and implementing sustainable practices within their operations. Collaboration within the financial sector is also crucial to present a unified voice to governments and advocate for policies conducive to green finance.

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