Sustainable Finance Live: Regulations driving sustainable transactions

Editorial

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Moderator Anna-Marie Slot, founder of Transition Value Partners, opened the session by listing some of the ESG-linked regulations such as the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Nature Restoration Law, and the Biodiversity Net Gain. Many of these regulations are under the EU, with Slot stating, “The EU has been probably the most prolific when in terms of passing laws around the space.”

When discussing what is driving the market interest, Tonia Plakhotniuk, climate and ESG capital markets at NatWest Commercial and Institutional, stated that European Sustainability Reporting Standards (ESRS) have been a “game changer”. She added the ESRS “is probably the only framework to date which will require banks and corporates to report on their nature and biodiversity matters for the first time next year. That would be done under the double materiality assessment principle, whereby corporates and institutions will have to reflect the potential implications from nature related risks on their financial performance and the balance sheet, as well as the potential negative impacts from the operations of the bank.”

Plakhotniuk further added that there are some stringent requirements coming from the ECB, but investors are also driving the market interest in sustainability: “Every conversation pretty much that would go into with investors and clients doesn’t go without discussing nature and biodiversity.”

Turning to the role data a technology plays, Musidora Jorgensen, chief impact officer at World Wide Generation, said, “The opportunity for tech and data is to accelerate the sustainable outcomes that we want to see and by aggregating the data that’s required in order to be able to report, obviously reduces risk from a compliance perspective, but what it also does is allows you to as an organisation so to really see the insights.”

Looking at ESG regulation from the perspective of an asset manager, Carolina Minio Paluello, CEO, Arabesque AI, mirrored Plakhotniuk’s point arguing that the next generation of investors are the ones who care about ESG investment: “It’s starting to come to the investment world. Whoever is in wealth management starts to realise that when the children come into the meeting, something is happening.”

Moving towards a digital assets perspective on this issue, Devina Paul, CFO, Zumo, commented, “What we understand is that these regulations are driving the demand, and with that demand is this requirement for scalability, which isn’t there at the moment.”

Paul argued that looking at examples like biodiversity and nature credits “the projects are small, they are fragmented, they are disparate.” But if you “take something like tokenisation, it brings in this aspect of you’re able to rationalise assets, you’re able to bring in more liquidity into the market. You’re also able to introduce an aspect of gamification or incentivisation, and reduce cost.”