Sustainable Business and Sustainable Finance

Sustainability needs to become the global standard of business: without this, it will be impossible to achieve the Paris climate goals and the Sustainable Development Goals of the UN. But how can globalised companies with worldwide supply chains take on social and environmental responsibility? How does sustainable finance advance the cause of decarbonising the world’s economy?

Transformation of the business sector and financial markets

The global context

A sustainable business sector and sustainable financial markets go hand in hand. Both have long been an issue in global politics, from the G20 to various UN bodies and the EU. At its core, the idea is that companies should develop business models that use energy and resources sparingly, protect the environment, retain biodiversity, develop technology for adapting to climate change and respect human rights.

The transformation that will be necessary to achieve this is a universal one, as laid out in the global Sustainable Development Goals of the United Nations. In order to achieve these, consumers, too, need to make their purchases from sustainable companies, the whole of society must get on board and demand of policymakers that they push through standards and regulations that promote sustainable business.

In the private sector in particular, realisation of the SDGs is just starting out. Goal 17 “Partnerships for the goals” is thus especially relevant. The German Council for Sustainable Development (RNE) facilitates dialogue between NGOs, the scientific community, the political arena and the business sector as well as in regional clusters so that solution finding can be a joint process.

The financial markets have a key role to play. Article 2 of the Paris Agreement states, “finance flows must be made “consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”. The UN Conference on Trade and Development (UNCTAD) estimates that in order to reach the UN’s Sustainable Development Goals, five to seven billion dollars need to flow into sustainable development annually. This requires a radical refocusing of capital expenditure and finance culture.

Role of the financial sector

An important step on this path is to create transparency: investors need to know, for instance, which companies, banks, insurers and financial service providers are putting their money into renewable energies and which ones are putting it into fossil fuels. Moreover, comparability of the information worldwide needs to be possible. The European Commission has established a High-Level Expert Group on Sustainable Finance, which is currently examining the issue of how sustainable investment can be elevated in Europe. The RNE took up the topic of sustainable finance in its work programme in November 2016 and maintains close dialogue with financial market players at all levels.

In the summer of 2017 together with Deutsche Börse Group, the RNE founded the Hub for Sustainable Finance Germany (H4SF).

Important reporting

Since financial year 2017 large companies have been required by the EU to report on how their activities impact on the environment and society. To do so, companies may use the Sustainability Code as a framework. The Code can also be used as a basis for valuation within the scope of portfolio management, for corporate bonds, in lending and for providing investors with information. This invigorates competition in the area of sustainable business. The Sustainability Code is also known beyond Germany’s borders as a practicable tool that is compatible with the requirements on non-financial reporting laid out by the EU.

Consumption and recognition

Under its “sustainable consumption” focus area, the RNE provides consumers with support in making decisions in favour of fair and ecologically minded purchases. In the Sustainable Shopping Basket the RNE contributes a wide variety of tips on alternative consumption, investment strategies and saving strategies.

Moreover, the RNE fosters public recognition of sustainable business models and practices, such as through the German Sustainability Award or the honouring of companies that incorporate social and environmental factors when selecting suppliers.

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