What is the role of sustainable finance and what are its main challenges today?
The formulation of the Sustainable Development Goals (SDGs) and the adoption of the Paris Climate Accords in 2015 brought sustainability to the forefront. The financial industry rapidly evolved to cater to the demand for sustainable finance, responsible finance and impact investing. Major sustainable finance vehicles include green and social bonds that finance environmental and societal investments, private equity funds and wealth management that invest in SDG-related investments, and, of course, impact investing by international organisations. In parallel, the European Commission is developing a regulatory taxonomy of economic activities according to environmental, social and governance (ESG) criteria.
The most important challenges to sustainable finance are: (1) the failures of markets to price sustainability risks; (2) lack of consensus on standards and definitions; (3) heterogeneity and inconsistency on SDG data and services; (4) improvement of market governance mechanisms and regulatory oversight; (5) design and implementation of digital technological solutions; (6) internalisation of sustainability norms into public policy and corporate governance.
Why is sustainable finance an important topic for the Institute?
The Geneva Graduate Institute is convinced that peace is unthinkable without sustainability. We believe that finance should be a key enabler of the transformation that sustainability implies, working for that purpose in close interaction with political actors, international organisations, NGOs, civil society and academic institutions.
The Geneva sustainable finance ecosystem is one of the most developed in the world and benefits from the presence of international organisations. The Institute has a long-standing academic tradition of connecting finance with development. Building on these strengths, it’s expanding its contributions to finance and sustainability – in teaching and research.
Why did you decide to create the Swiss Lab for Sustainable Finance and what are its main goals?
The Lab – a multistakeholder partnership between Swiss universities and universities from low-income countries and international organisations – was created to advance research and practice in sustainable finance.
Our goal is to address the challenges in scaling up investments to meet the Sustainable Development Goals and train the next generation of researchers in sustainable finance. Our teams will focus on actionable research. We will develop standardised impact measurement tools, we will research the complementarity between environmental and social investments, market institutions, inclusion and inequality, governance and regulation, and how we can harness fintech for SDG investing.