How Much Does Europe Invest in Sustainability

Despite the decrease in funds dedicated to sustainability last year, with a net decline of $2.5 billion globally. Europe, in contrast, maintained positive net flows, attracting $3.3 billion in the quarter quarter of 2023, albeit marking a decline compared to the previous quarter.

The results emerge from the second annual report of O-Fire , the Observatory on sustainable finance launched two years ago by the University of Milan-Bicocca together with Banca Generali Spa and Aifi – Italian Association of private equity, venture capital and private debt.

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Sustainability in the European Union

The report, entitled “ESG Disclosure Obligations, sustainable funds and renewable energy sources in the midst of the ecological transition,” also identifies the causes of the decline: according to analysts, the complex economic and geopolitical context played a decisive role international and the cascading consequences it brought with it: from fears of recession to increased inflationary pressure and interest rates.

Europe is moving rapidly towards a renewal of the regulatory framework for sustainability , with the obligation for almost 50,000 companies to adhere to the European Sustainability Reporting Standards, and aims for greater transparency and corporate social responsibility, key factors for competitiveness on the market.

The analysis highlights how the European taxonomy is still in a phase of full evolution and that new additions and modifications will be necessary that can encourage the investments necessary to make the European Union zero emissions in 2050.

Investments in renewable energy in Europe

The report highlights the crucial importance of investments in renewable energy sources for the energy transition and the achievement of sustainable finance objectives. However, challenges related to the impact of climate change on energy production are emerging, which could redefine the global balance of supply and demand and influence investments in the sector.

“Investments in renewable energy sources – the researchers write – while positively influencing the ESG rating, can have an opposite effect on the credit rating. An analysis of the relationship between the two types of ratings relating to 116 European companies showed that only for 35 companies, which represent 30% of the sample, the credit rating and the ESG rating have the same quality.”

The allocation of resources towards specific interventions such as the prevention of natural disasters and food security remains fundamental to mitigate the effects of climate change.

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First published in StartupItalia. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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