Goal 13 of the 2030 Agenda for Sustainable Development, “stop global warming”, implies “the need to transform energy, industrial, transport, food, agricultural and forestry systems”. Countries must reduce their CO2 emissions and switch to clean energy. The question today is how to best finance this transitionparticularly in emerging economies. Visit the specialized elEconomista ESG portal.
This message entered the business world who not only took special responsibility for this task – driven by regulation and societal clamor – but also saw the enormous economic and commercial opportunity that can arise from this energy transformation. [1].
THE Environmental sustainability has become an important element strategic priority and more than 4,000 businesses and financial institutions have already committed and are working with the Science-Based Targets initiative to reduce their emissions. But the investment figures needed to address this great economic transformation are enormous. It is estimated that globally there will be a need to invest $4.1 trillion per year in transition technologies and energy infrastructure until 2050. [2].
It is therefore not surprising that, in this context, the Funding became cornerstone and key lever of the transformative movement. Companies seriously engaged in a strategy to transform their business model no longer only talk about ESG (Environment, Social and Governance) but rather ESG+F, F being the financial variable that gives strength and support to the company’s overall strategy.
THE Sustainable financing attempts to be part of the solution, with instruments that allow an organization to more easily raise financial resources for its activities, taking into consideration not only traditional financial criteria (risk-return), but also environmental, social factors and corporate governance.
COVID, like many other issues, has created a before and after in the trajectory of sustainable financing. In our country, this increased by 45% in 2020 compared to 2019 to reach 33,026 million euros and continued this trend in 2021 until reaching 54,951 million euros. Over the past two years, although the total volume continues to increase (60.134 million in 2022 and 60.788 million in 2023), the growth has been more moderate (9% in 2022 and only 1% in 2023).[3]. Among the positive aspects, it is worth highlighting the entry of new participants and the appearance of new financing formulas and instruments.
Obtaining this type of financing requires compliance with sustainability standards, which is why it can only be addressed to companies and institutions demonstrating adequate governance and solid environmental and social performance. . Companies that benefit from this type of financing obtain advantageous conditions, but commit make a “sustainable transition” now make transparent to society this commitment and this execution.
Among the two existing ways of demonstrating this alignment of the funds obtained with the objective of “sustainability”, that known as “use of funds” is the one which is the most developed and the most used, in particular by companies which, in because of their activity and commitment to an environmental strategy, they have green assets in their portfolios to which they can unequivocally attribute the destination of the funds raised
The second way concerns the Link to sustainability (SL) bonds or loans. In this case, the financial conditions of the instrument are linked to meeting the sustainability KPIs that the organization is committed to achieving, and the organization will be penalized if it is not able to achieve them.
Whether one or the other is the way to achieve this sustainable financing, the main challenge lies in ensure compliance of the purpose for which it was obtained: its impact on sustainability. Regulation continues to progress significantly, seeking to bring clarity to the market and reassurance to investors.
An important step on this path was the approval of the European green bond standard based on eligible activities included in the European taxonomy, which will come into force at the end of this year. Voluntary in nature, this new regulation establishes a series of requirements aimed at increasing investor confidence and reducing “greenwashing”. However, the SL still has a way to go. Regulation must be strengthened in an even less developed market, guaranteeing the relevance and ambition of the indicators chosen by lenders and issuers, to minimize the risk of “greenwashing”
In any case, in both cases, the Transparency and information it’s what generates Trustand the trust is a sine qua non condition for achieving Engagement of investors and financiers.
[1] The global economy could generate $43 trillion over the next five decades by accelerating the energy transition through increased investment in clean energy systems and coordinated regulatory work, according to Deloitte’s Global Turning Point 2022 report. on a global scale.
[2] Report on accelerating the transition of energy resources from EY.
[3] OFISO annual reports corresponding to the years 2021, 2022 and 2023.
