European businesses need to ‘urgently’ align their finance and investment to business models with the EU’s environmental and social objectives, a new report by the EU Platform on Sustainable Finance has said.
The report, which is now available on the European Commission website, identifies four core elements for evaluating corporate transition plans to a net-zero, resilient, sustainable, and inclusive economy in line with the Paris Agreement – science-based and time-bound targets, key actions to achieve those targets, financial planning, and governance structures for plan implementation.
It states that private finance will play a critical role in bridging the estimated $750 billion to $800 billion annual investment gap required to maintain the competitiveness and sustainability of European industry, as highlighted in the Draghi report.
‘Invaluable advantages’
‘[The report] presents a timely opportunity to explore how the EU can use its framework to better facilitate transition finance,’ it notes in its introduction. ‘Working with a clear concept of robust and Paris-aligned transition plans offers invaluable advantages.
‘Credible forward planning will help target public interventions in an informed manner, to help manage an orderly and just transition that leaves no one behind. Additionally, greater transparency about the availability and affordability of technologies could foster technological innovation.’
Complementary regulations
The report also examines how existing EU regulations, such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), can complement business’ efforts by fostering transparency and accountability.
The EU’s framework supports a holistic approach to transition planning, integrating environmental objectives such as climate adaptation and biodiversity preservation alongside social priorities like just transition principles.
‘All stakeholders should collaborate to support companies in developing robust transition plans over time,’ it added. Read more here.
