Sustainable Finance Market Dynamics: An Overview

The NGFS identifies three main channels through which financial markets can help steer the necessary transformation of the real economy towards higher levels of sustainability, including: disclosure; risk management and mobilization of capital. As market participants are calling for improved sustainability disclosures and leading global collaborate to establishing a single, coherent, global sustainability disclosure standard, aligned with the TCFD recommendations the NGFS recommends that sustainability risks become integrated into global accounting frameworks. As financial institutions should increasingly incorporate climate and sustainability factors into their decision-making processes, the NGFS recommends that ESG data/ratings providers and credit rating agencies improve their transparency and demonstrate how climate and sustainability factors are captured in their methodologies. Market growth in green/sustainable bonds and loans has been underpinned by development in principles and reporting standards which should continue to evolve to address investor concerns about greenwashing and facilitate comparability.