Financing the transition to a green economy

Jan 19, 2020

To promote sustainable finance, the finance industry must incorporate environmental, social and governance factors into investment decision-making. Orla O’Gorman explains how companies can enable investors to invest in sustainable, socially responsible assets.

The climate crisis is the most impactful and far-reaching agent of change that we will see in our lifetime, the impact of which is comparable only with, perhaps, the industrial revolution. It will permanently alter how our society and economy operate – that includes our financial systems and how capital is allocated.

We have already seen the world’s largest asset manager, Blackrock, asserting that climate change will be the focus of its new strategy and that it will reshape the industry as we know it. We have also seen the world’s largest sovereign wealth fund, Norges Bank, divest entirely from all oil and gas exploration.

To promote sustainable finance, the industry needs to incorporate environmental, social and governance (ESG) factors into investment decision-making, supporting the allocation and transfer of capital towards sustainable and transitioning assets. Stock exchanges are at the heart of the global financial system and will play a vital role in enabling this transfer in an efficient, transparent way.

Two-pronged approach

As part of Euronext’s new strategic plan, Let’s Grow Together 2022, we have developed an ESG strategy with a two-pronged approach: 

  • Sustainable practices (what we do internally); and
  • Sustainable products (what we offer externally).

Internally, our goal is to embrace the latest and greatest methods of sustainable working. Externally, meanwhile, our goal is to develop and support sustainable products and services for issuers, investors and the financial community, and we have already launched two initiatives in support of this.

The first initiative is Euronext Green Bonds, which will allow investors to discover, compare and participate in sustainable investment opportunities and allocate capital accordingly.

The second initiative, the publication of our ESG reporting guidelines for issuers, enables listed companies to communicate effectively to stakeholders about their current work in sustainability and assists them in addressing ESG issues with investors that will encourage them to invest in sustainable, socially responsible assets. The guidelines also provide a basic framework for ESG strategy and reporting.

Looking to the future

We hope that, by empowering issuers and investors with these products and tools, we can make the transition to a sustainable economy and finance a future of which we can be proud. 

Orla O’Gorman is Head of Equity Listing Ireland at Euronext.