Finance is a formidable lever for change where sustainability is concerned and has a crucial role to play in shaping the world in which we live. If financial institutions align their investments and portfolio with the environmental and climatic challenges that lie ahead, the transition towards more sustainable and low-carbon models will be faster and more successful
The activity of any economic sector relies on natural assets and services such as water, forest products, clean air, foods, biodiversity or erosion control.
This is: it relies on natural capital. However, it constantly suffers the pressures of human activity, which translates into its permanent deterioration and loss.
Due to natural capital´s invisible economic value, nature conservation and the services it provides us with is neglected. Current business models create important externalities, whose value is not taken into account, such as climate-related damages, pollution, land conversion and the exhaustion of natural resources, among others.
In recent years, the scientific, economic, financial, political and legal sectors have launched different initiatives to revert this situation, and to make it easier to understand and report how businesses and organizations depend on natural capital.
With this goal in mind, in January 2018 the European Commission´s High Level Expert Group on Sustainable Finance published a report highlighting natural capital´s importance, which emphasises how environmental challenges transcend climate change.
Securing long term business viability necessarily entails the continuity of ecosystems and the natural resources they rely on, as well as understanding the risks and opportunities associated with the business-natural capital relationship, and their real value.
As the key pillar of the economy via banking activities, investments, asset management and insurance -both public and private organizations- the financial sector´s role is crucial in this matter. Financial entities have the great potential for reorienting investments towards more sustainable technologies and business opportunities, finance long-term sustainable development -especially concerning climate change, energy transition, and biodiversity and natural ecosystem conservation- or contribute to the creation of a low-carbon, climate-resilient circular economy.
Compliance with global climate and environmental commitments
Aware of finance´s key role in the transition towards sustainability, the European Commission launched the Sustainable Finance Action Plan in March 2018. Its objective is to promote the financial sector´s contribution to a more sustainable global economy.
The proposed measures want financial entities to endorse the European´s agenda on climate and sustainable growth. In doing so, they will be supporting the Paris Agreement on Climate Change and UN´s 2030 Agenda for Sustainable Development.
In May 2018, the EU introduced a legislative package on sustainable finance, whose objective is to establish the criteria which will determine if an economic activity is “environmentally sustainable”: taxonomy.
As a company with expertise in the field, Ecoacsa has collaborated in the taxonomy of sustainable activities coordinated by the TEG.
The G20 created the TCFD (Task Force on Climate-Related Financial Disclosure) in late 2015 to address the financial community´s concerns on a global scale, regarding the incorrect evaluation of assets in connection with the full extent of climate risk and its threat to the market´s stability.
The recommendations developed by the TCFD provide the financial sector with a harmonised framework so banks, insurance companies, asset managers and owners can improve climate-related financial disclosure. Risks that the market´s adjustments to climate change will be incomplete, belated or disruptive will also be minimized.
On the other hand, the investment community increasingly demands more transparency regarding their investment portfolio and future asset-management activities, which is why there are more requests for ESG (environmental, social and governance) criteria information. Because of this, and the willingness to end corporate issues related to mismanagement and misgovernment, Spain transposed EU´s 2014/95/EU Directive through the Non-Financial and Environmental Information Act 11/2008.
Furthermore, the leadership and positive performance of the companies included in the Dow Jones Sustainable Index (DJSI) and FTSE4Good Index, are also increasing non-financial disclosure.
These initiatives wish to boost the creation of a global sustainable financial system based on three pillars: environmental accounts, social impact and institutions´ governance (ESG criteria).
Publicizing ESG criteria offers a holistic vision of sustainability, as it includes the decisions made by companies regarding issues such as green financing, social responsibility, human capital, diversity or corporate governance.
Products and services
Adaptation processes of the European Commission´s Action Plan to promote the financial sector´s goal of achieving a more sustainable economy
Assessment in the development of accounting models connected to natural capital, climate change and sustainable finance
Environmental profit and loss statement models; environmental assets accounting
Risk analysis of impacts and dependencies on climate change and natural capital