The boom of green finance has brought in a new wave of regulations and standards surrounding the field of sustainable finance stated by Bahaa Abdul Hussein. They are predominantly aimed at curbing the carbon emissions of big companies, allocating funds for green projects, and creating market standards for green finance.
Over 400 sustainable finance policies are currently being enforced around the world. Most of these regulations were put into action by the G20 member nations. In recent times, it has become much easier to fund the products and services of sustainable finance as the world is on the same page about meeting our climate goals. Before this, it was only being enacted by private sectors and a handful of countries, but now most of the countries have kickstarted their sustainable finance goals to achieve in the next decade. These rules and regulations cover the areas of maintaining market standard and checking carbon emissions. Major changes have been taking place in the field in the last few years.
Read on to know about the various committees and regulations that have been formed for the purpose of boosting and placing a check on sustainable finance.
SFDR
The European Union has formulated the SFDR or Sustainable Finance Disclosure Regulation to use in its markets. Its main objectives are to improve sustainability and track the openness of operations. It comes on the heels of many companies using greenwash practices to do well in the eyes of government and thwart the environmental policies.
What does SFDR do?
SFDR is tasked with imposing holistic sustainability disclosure protocols covering the ESG (environment, society and governance-related) tenets of sustainable finance. 6 years after its first implementation, it has formed a pivotal part of the European agendas for green finance. It aims at curtailing the carbon footprints, achieving carbon offset as well as promoting climate action. It allows market participants to monitor their environmental action in order to head towards carbon neutrality. Mitigating climate change, sustainable use of water sources, preventing pollution and maintaining a healthy ecosystem are also on the agenda.
TCFD
Task Force on Climate-Related Financial Disclosures(TCFD) is responsible for recommending the best climate policies in the area of green investments. It helps all parties involved understand the carbon footprints of their investments and how to pattern their carbon-based risk management. It formulates strategies, analyses our operations from ecological perspectives and maps out goals to help achieve every climate target of sustainable finance. Most importantly, it comes up with standards to make sure green mechanisms and data metrics used at the individual organization’s level align with those of green finance on the global scale.
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