In this post we publish the replies from Dr. Duc Luu (Fondation Nationale des Sciences Politiques), member of the DOLFINS Consortium. The future of Europe depends on Sustainable Finance. Citizens have the unique opportunity to contribute to the debate at an early stage, well before the policy proposal is issued. The FET-funded project DOLFINS is supporting this effort. The contributions of DOLFINS members are published in a series of blog posts on the simpolproject platform and on our twitter profile Follow @simpolproject.
Question 1. From your constituency’s point of view, what is the most important issue that needs to be addressed to move towards sustainable finance? (sustainable finance being understood as improving the contribution of finance to long-term sustainable and inclusive growth, as well as strengthening financial stability by considering material environmental, social and governance factors).
- Encourage and maintain sustainable investments in environment-friendly sectors.
- The financial sector should play a central role in this process and therefore it should be also protected from the related risks.
- The government should improve the regulatory measures for investments in environment-friendly sectors to avoid excessive risk taking.
Question 2. What do you think such an EU taxonomy for sustainable assets and financial products should include?
Reply: The taxonomy should not provide too much room for excessive risk taking by investors, which may create a potential source of systemic risk.
Question 3. What considerations should the EU keep in mind when establishing a European standard and label for green bonds and other sustainable assets? How can the EU ensure high-quality standards and labels that avoid misuse/green-washing?
Reply: Increase the transparency and enhance the supervision (from both the government and society) of the financed projects.
Question 4. What key services do you think an entity like “Sustainable Infrastructure Europe” should provide, more specifically in terms of advisory services and connecting public authorities with private investors?
- I think two of the key services are screening project applications and monitoring the financed projects.
- In addition, the entity should also provide the consultant service in sustainable finance to county members, public authorities and private sectors.
Question 5. It is frequently stated that the inherent short-termism in finance, especially financial markets, represents a distraction from, or even obstacle to, a long-term orientation in economic decision-making, including investments that are essential for sustainability. Do you agree with this statement?
Question 8. What are some of the most effective ways to encourage credit rating agencies to take into consideration ESG factors and/or long-term risk factors? Please choose 1 option from the list below.
- Create a European credit rating agency designed to track long-term sustainability risks
- Require all credit rating agencies to disclose whether and how they consider TCFD-related information in their credit ratings
- Require all credit rating agencies to include ESG factors as part of their rating
- All of the above
Reply: All of the above.
Question 9. What would be the best way to involve banks more strongly on sustainability, particularly through long-term lending and project finance?
- Increase the banks’ awareness of unsustainable development risks and the potential (direct and indirect) impacts of climate changes on the banking system. Show them the benefits when the economy adapts and transits to a more sustainable path.
- Have comprehensive green banking policies that encourage banks to finance. Fiscal incentives such as tax support for long-term investments that are essential for sustainability (similar to those successfully used in R&D) should be considered.
Question 10. What would be the best way to involve insurers more strongly on sustainability, particularly through long-term investment?
Reply: Increase the insurers’ awareness of unsustainable development risks and the potential (direct and indirect) impacts of climate changes on their business. Show them the benefits when the economy adapts and transits to a more sustainable path.
Question 11. What do you think should be the priority when mobilising private capital for social dimensions of sustainable development?
Reply: Should consider to support people who may be affected when switching from traditional industries to green industries. This will create more consensus for the mobilizing process.
The SIMPOL Project is currently funded by the H2020 European grant DOLFINS (no. 640772) in the Global Systems Science area of the Future Emerging Technologies program.