Disparate sustainable investing standards hinder capital flow into transition projects, the CFA Institute said in a report that called for greater collaboration on creating cohesive taxonomies.
Disjointed sustainable investing taxonomies and reporting standards across jurisdictions are holding back capital flows into transition projects, according to the report. Currently, no standardized definition of eligible activities and entities exists, no international organization has endorsed transition finance instruments, and high-risk perceptions associated with the novel technologies involved in decarbonizing high-emitting sectors are common.
Many jurisdictions, including the EU, have created a taxonomy to define green and sustainable activities, to frame sustainable investing and combat greenwashing. However, different countries/regions use different approaches to develop their taxonomies. The lack of interoperability between taxonomies could be a barrier to international capital flows.
In both developed and developing markets, blended finance plays a crucial role by bringing different sources of public and private capital together. Policymakers should also allocate additional public and blended finance to better mobilize private sector investment consider using reverse auctions/climate bad banks to manage phaseout and use labeling to help individual investors navigate the investment product landscape, thereby creating a more informed and sustainable financial ecosystem.
Also, corporations should provide feasible and credible transition plans to assure investors/financiers of their steadfast commitment to attaining transition targets.
Click here to read the original article published by Delano.
Please give your feedback on this article or share a similar story for publishing by clicking here.
