Not necessarily or, at least, less and less. To get a better insight, let’s focus first on what sustainable development represents.
Sustainable development is a concept with a long-term perspective and aims at reconciling economy, society and environment. It is based on the idea that we do not inherit our planet from our ancestors, but borrow it from our children.
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Brundtland Report, 1987 - Mrs Gro Harlem Bruntdland, Norwegian Prime Minister
What is the role of finance in sustainable development?
Transition towards a sustainable economy will require massive investments which cannot be supported solely by public funds: This is where finance products that mobilise private and professional savings supporting sustainable projects come into play.
Gilles Klein from the CSSF, explains in an interview why sustainable development and finance are closely linked. He outlines the fundamental concepts and explains why it is important that financial players integrate a “sustainable” approach in the context of their activities.
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What are the pillars of sustainable finance?
Sustainable finance refers to financial decisions that not only aim for financial performance but also take into account the impact of investments on the environment, the social aspects and the sound business management (also known as governance aspects).
Under the “European Green Deal”, the EU established a regulatory framework in order to develop and enhance the integration of environmental, social and governance (ESG) factors in the functioning of the financial markets and in the financing of the economy.
The aim is to adopt measures to create a financial system capable of promoting a sustainable development in the economic, social and environmental areas, by contributing to the implementation of the Paris Agreement and of the 2030 Agenda for Sustainable Development of the United Nations.
What about yourself? What role can you play to ensure a more sustainable economic transition?
Each of us tries to adopt common sense gestures with respect to sustainability (e.g. waste sorting) or in our consumption choices (preferring a clothing brand rather than another for its compliance with ethical criteria in its supply chain). But few of us have already thought about the fact that our savings can also have a leverage effect.
For further information on the relationship of Luxembourg residents towards sustainable finance:
A survey conducted by ILRES using a representative sample of 1,011 people living in Luxembourg, shows that the majority of the interviewees are of the opinion that the financial sector plays an important role in the transition of our economies towards more sustainability. In addition, the interviewees show interest in investing in sustainable products and 21% have already done so. Nevertheless, the majority of respondents admitted that their level of knowledge regarding sustainable finance is low and that efforts with respect to information and education should be made to fill these gaps. This highlights the importance of and need for educational initiatives in this field.
The offer of “sustainable” investment products is constantly expanding, as well as private clients’ appetite for this type of investment. Moreover, since 2 August 2022, the professionals offering investment advice and portfolio management services are required to take into account their clients’ wishes as regards sustainable finance (sustainability preferences). After having assessed their preferences, the professionals of the financial sector recommend different types of investments adapted to their profile.
The section “Sustainable finance” was created to address, each month, different aspects of this topic.
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