A critical lever for tackling the ecological and economic challenges of our era
Finance describes a set of mechanisms that provide the economy with the capital it needs to function. he vast majority of projects, real estate for example, are financed through bank loans, whether for individuals or companies. It plays a key role in a country's competitiveness and wealth because its purpose is to ensure optimal use of resources and thus improve the well-being of all.
Taking into account natural resources might seem obvious to ensure a clean environment and sustainable production in the long term and the maintenance of our lifestyles, yet conventional finance takes very little account of these variables. Financing an ecological and socially just transition is therefore a major challenge for the future of our societies. Financing a socially just ecological transition is therefore a major challenge for the future of our societies.
In order to support the real economy and long-term projects, sustainable finance favours financial operations that take into account extra-financial criteria known as ESG, or environmental, social and governance criteria. These criteria include analysis of the impacts of business activities in terms of carbon emissions, biodiversity protection, waste management, etc.; societal impacts; and the set of rules that govern the way companies are controlled and managed.
Sustainable finance covers a range of different practices
- Responsible Investment (RI). It integrates ESG criteria into the investment and management processes. Responsible investment encourages companies and management companies to take extra-financial criteria into account. The SRI label supported by the public authorities (SRI for Socially Responsible Investment) is internationally recognized and aims to promote the visibility of SRI management by retail investors. The main label in France, it continually grows in importance both in terms of the number of labeled funds and the total assets under management.
- Green Finance. This umbrella term covers all financial operations that promote the energy and ecological transition and the fight against climate change. Its main tool consists of green bonds, loans used to finance projects that contribute to the ecological transition: water, waste and energy management, etc.
- Solidarity Finance. This groups together investments whose commitment is based on social criteria: activities contributing to the social fabric linked to employment, social and housing, international solidarity and the environment.
- Social business. This category consists of companies whose purpose is primarily social. Profits are reinvested in combating exclusion, environmental protection, development and solidarity.
- Impact Finance. Impact finance is an investment approach that aims to generate a positive social and environmental impact in addition to financial returns. It supports projects and companies that help solve social and environmental problems, while seeking to achieve sustainable financial results.
The Paris Financial Centre is committed to sustainable finance and a low-carbon economy
Since the early 2000s, the Paris Financial Centre has developed significant expertise and fostered a strong ecosystem around ESG criteria and, more broadly, green and sustainable finance.
The highlight of this mobilisation was the first Climate Finance Day organised at UNESCO in Paris in preparation for COP21 in 2015. This event, where financial players announced their first significant commitments, notably on divestment from coal, marked a real wake-up call and proved an accelerator of this mobilisation both in France and internationally.
To bring together economic actors committed to this path, the Paris Financial Centre in 2017 created "Finance for Tomorrow", now Institut de la Finance Durable (a branch of Paris EUROPLACE) dedicated to green and sustainable finance, with the aim of positioning Paris as a leading hub for issues of green and sustainable finance.
Financial players the world over must come together and mobilise to accelerate the energy transition. The standards of sustainable finance must be fully integrated throughout the sector.
Data from the observatory
New: the Net-Zero Donut!
How to track the Net-Zero commitments of financial players? Discover a detailed analysis of the 5 pillars of the Glasgow Financial Alliance for Net-Zero (GFANZ) Net-Zero Transition Plan (NZTP) and the Net-Zero guidelines: Banking Alliance (NZBA), Asset Owner Alliance (NZOA) and Asset Managers (NZAM) in the form of an easy-to-read indicator: the Net-Zero Donut.
Analysis of sustainability regulatory data
The Observatory opens up a new field of analysis using data contained in the regulatory reports of financial institutions: "29 LEC reports" of French players and Pillar 3 ESG reports of European banks.
Commitments monitoring of financial actors
Governance
