Providing finance for the carbon transition is one the greatest challenges of our age. Trillions of dollars will be needed as we move away from carbon-intensive energy while protecting nature and biodiversity. The key source of this finance will be the capital markets, which will look for financial instruments that are designed for sustainability.
We can see that the market potential is huge and there have been many great strides already taken. But what has emerged is a heterogenous, dispersed market, with differing standards. The next step is to create an easy, cost effective and systematic process to ensure the market operates as efficiently as possible. This will allow the money to get where it is needed, with the lowest possible cost of capital, for the greatest possible good.
Speaking at the World Economic Forum’s recent meeting at Davos, our CEO Lieve Mostrey outlined her vision for how financial market infrastructure (FMI) firms such as Euroclear can help create the markets for sustainable finance. “By collaborating across the public and private sectors we can scale sustainable finance infrastructure, removing barriers that presently exist, and better supporting the transition towards a greener world,” she noted. Moreover, “leveraging market infrastructure to help overcome informational and issuance barriers…will allow us to increase the ease of ESG financing which will result in deeper capital markets and lower costs of issuance.”
A recent report by us and PwC looked at how FMIs are in a unique position to help the development of the sustainable finance market by removing five key barriers and turning them into accelerators of change. These changes will make issuance less costly, make investor due diligence more efficient and increase transparency and trust. They will also give more equal access while helping the sustainable finance market and the mainstream finance market to converge.