The Global Sustainable Investment Alliance (GSIA) unveils a fascinating revelation: a staggering $30.3 trillion currently finds its home in sustainable assets worldwide. Yet, this monumental figure coexists with a nuanced narrative of tightening regulations and evolving industry definitions, sparking shifts in funding dynamics across the United States and Europe.
Delving into the sixth edition of the biennial Global Sustainable Investment Review (GSIR), we embark on a journey through the intricate realm of sustainable finance. The report unveils a remarkable 20 percent surge in sustainable assets under management across non-US markets encompassing Canada, Europe, Japan, Australia, and New Zealand since 2020—a compelling testament to the global resonance of sustainability.
Yet, within this complex mosaic, a curious pattern emerges. Adopting more stringent definitions directly responds to the growing specter of greenwashing and unfurls its consequences. The United States bears witness to a monumental $17 trillion dip in reported assets under management. Europe, too, witnesses a gradual transformation as the proportion of assets deemed "sustainable" undergoes an annual reduction of approximately five percent, mirroring the tightening definitions.
The GSIR unfurls a clarion call for clarity on a global scale. It beckons for a shared understanding, a common lexicon for what renders an asset "sustainable." The GSIA, in response, unfurls an ambitious array of recommendations. Among them is the proposal to convene a Sustainable Finance Regulatory Convergence Taskforce, armed with the authority to navigate the labyrinth of global regulations towards alignment.
In parallel, it implores governments to foster conducive capital market ecosystems, seamlessly interweaving subsidies, market incentives, and governmental structures with the noble aims of climate and environmental stewardship. This alignment aims to facilitate the unlocking of transformative currents of public and private investment.
Further, the report extends its reach to the realm of disclosure, echoing the Taskforce on Nature-related Financial Disclosures (TNFD). It calls upon regulators to incorporate TNFD reporting into the ISSB framework, a pivotal step toward harmonious financial disclosure standards.
As the crescendo of complexity builds, the report culminates with an impassioned plea for widespread and expeditious adoption. The clarion call reverberates for establishing a global baseline, a bedrock upon which corporate sustainability disclosures, ESG ratings, and benchmarks can find their foundation.
James Alexander, chair of the GSIA, said the global sustainable finance industry is continuing to mature by introducing more transparent disclosure and labeling regimes - such as the EU's SFDR, the UK's SDR, and the SEC's proposed Climate Disclosure Rule.
"But much more can be done to accelerate the transition to a sustainable future," he added. "That is why, for the first time, GSIA has made a series of policy recommendations in the GSIR - covering measures to increase investment opportunities in the net-zero transition, the need for closer global alignment on sustainable finance regulations, enhanced data sharing, and a sharper focus on disclosure of nature and biodiversity risks and opportunities.
"With the right actions and support from policymakers around the world, the global finance industry can play a prominent role in helping bring about positive change in the years to come."
Maria Lettini, CEO of the US Sustainable Investment Forum, added that the GSIA report had arrived at a critical juncture for the global investment industry.
"While we continue to elevate the need to address our own nuanced local financial market challenges, we also support the incorporation of enhanced rigor and learnings from our peers across regions," she said. "I applaud the collaborative work of the GSIA secretariat to align the diverse regional approaches of the SIFs across the world into a strong holistic, sustainable investment voice as we address global policymakers ahead of COP 28."
Simon O'Connor, chief executive of the Responsible Investment Association Australasia, said: "This year's GSIR shows a clear story of a rapidly maturing industry, whereby standards have lifted across the world, to a point today where it is simply not sufficient to say you are doing responsible and sustainable investment, without being able to clearly articulate the real impact you are having.
"All in all, we welcome these developments that our organisations have been long advocating for, as we see this will result in a stronger industry that delivers more capital to creating the positive change we need to deliver on a net zero transition."