Sustainable finance whitepaper

Euroclear and Strategy& report shows unique role Financial Market Infrastructure can play in scaling the global sustainable finance market

Brussels/London, 21 September 2021 - The future is bright for sustainable finance, but only if significant market changes are implemented. A white paper published today by Strategy& (PwC’s strategy consulting business), in collaboration with Euroclear, identifies the key challenges in scaling sustainable finance and proposes actionable cross-border financial market infrastructure (FMI) solutions to propel the market further.

Sustainable finance could mobilise $25 trillion in additional capital globally by 2030, driving forward a 1.3% reduction in CO2 emissions equivalents and helping 430 million low and low-middle-income children access primary school education.

The study aims to raise awareness of the unique role that FMIs can play in scaling the global sustainable finance market. Today, the market is experiencing strong investor demand but an insufficient supply of sustainable securities and cross-border processing infrastructure to meet it. An FMI-driven approach leverages the trusted, central and neutral position of FMIs to address the fundamental obstacles on both the supply and demand side of the market, which are currently preventing the scaling of sustainable finance to its full potential.

FMIs, by nature, can support all market participants and asset classes regardless of where they sit along the market’s trajectory. Therefore, an FMI-driven approach can bring everyone along the journey, whether they are a longstanding market participant or just entering the market. These opportunities include:

• Encouraging greater sustainable finance issuance, through reducing infrastructure, regulatory and informational barriers to issuance
• Processing ESG (Environmental, Social & Governance) information flows including ESG metrics, disclosure and assurance
• Expanding the market to more asset classes and participants

The insights contained in this study should encourage a coordinated effort across financial market participants - driven by FMIs - to support the sustainable finance market to reach its full potential.

“This report illustrates the scale of the opportunity for sustainable finance. The real potential to reduce CO2 emissions is compelling, supported by the growing appetite for sustainable products amongst financial institutions. FMIs have a crucial role to play in driving this agenda going forward, delivering growth to the sustainable finance market and improving the sustainability of mainstream capital markets.”

“However, FMIs cannot accelerate change on their own. Committed collaboration across the financial industry is needed to create the conditions for a successful sustainable finance market.”

“It is clear that the sustainable finance market has a crucial role to play in responding to the challenges of the climate emergency. Additional mobilised sustainable financing could cut the time required to achieve the UN’s Sustainable Development Goals by over one year.” “Yet this report highlights there is a long way to go for sustainable finance to realise its potential. A cross-border FMI-driven approach would make a significant contribution to addressing the barriers to scaling up the global sustainable finance market.”

The study defines a set of five principles which, if met, would deliver an efficient and well-functioning sustainable finance market which include:

• Investors increase their demand for sustainable securities
• Issuers increase their supply of sustainable securities
• Investors can more easily identify and compare sustainable securities
• Investors are able to better invest in sustainable securities
• Market participants trust in the sustainable finance market

The paper also explores the avenues for FMIs and related partners to address key market gaps. A range of recommendations are set out for how an FMI-driven approach can drive the continued development of a successful sustainable finance market. And, finally, the paper quantifies the potential economic and sustainable impact of addressing key challenges in the sustainable finance market through an FMI-driven approach.

Euroclear group is the financial industry’s trusted provider of post trade services. Euroclear provides settlement, safe-keeping and servicing of domestic and cross- border securities for bonds, equities and derivatives to investment funds. Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise.

The Euroclear group includes Euroclear Bank - which is rated AA by Fitch Ratings and Standard & Poor’s - as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & International. The Euroclear group settled the equivalent of EUR 897 trillion in securities transactions in 2020, representing 276 million domestic and cross-border transactions, and held EUR 32.8 trillion in assets for clients by end 2020.

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivalled industry and functional capabilities of the PwC network to the task. We are part of the PwC network of firms in 155 countries with over 284,000 people committed to delivering quality in assurance, tax, and advisory services.

© 2019 - 2021 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.