When signing the 2016 Paris Agreement, a legally binding international treaty on climate change, world leaders agreed to pursue the ambitious goals of achieving climate neutrality and mitigating the effects of climate change. Almost every country around the globe recognised that business-as-usual is not an option if we are to save the planet and human existence. As a result of this realisation and commitment, different green measures are being taken globally, regionally, locally; at all levels of societies; and in the public and private sectors.
Redirecting capital flows toward a green economy is an important part of measures to take, so it is no surprise that there is a growing interest in using environmental, social and corporate governance (ESG) factors as guidance points for both public and private investors.
However, there is still much to be done to ensure not just sufficient investment volumes but also that investments labelled as ‘sustainable’ do, in fact, contribute to climate action objectives. In order to realise ESG markets’ full potential in supporting the global transition towards a climate-neutral economy, further effort is especially needed in the following three areas:
- Policymakers at all levels must urgently address greenwashing and the lack of transparent and comparable ESG data.
- In the context of sustainability reporting, double materiality approaches are better suited to address the urgency of climate change.
- Policymakers at all levels must ensure the interoperability and alignment of the rapidly evolving sustainability reporting initiatives.
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