Interview with Aleksandra Palinska
Aleksandra Palinska is the Executive Director at Eurosif, the European Sustainable Investment Forum, which is a pan-European association promoting sustainable finance at EU level. Its membership is comprised of national sustainable investment forums, including SSF. The organisation’s mission is to promote the development and adoption of sustainable investment-related policies, rules and market practices, that support public and private investments in making a meaningful and demonstrable contribution to the sustainable development goals set by the United Nations and the European Union, incl. the objectives of the Paris Climate Agreement. Eurosif’s activities involve contributing to European public policy through advocacy, research and by developing positions that enable a better understanding of sustainable investments. Eurosif also facilitates dialogue among national SIFs and market practitioners, raises awareness about EU sustainable finance rules and promotes sustainable investment best practices.
The EU is considered the global spearhead in promoting sustainable finance as an agent for change. In your opinion, Aleksandra, how successful has the EU been in this endeavour, so far?
The EU’s sustainable finance agenda has resulted in a wide range of standards, tools and requirements that aim to foster transparency, incorporate sustainability into risk management and reorient capital flows towards sustainable and transition-supporting investments. Certain rules are still a work in progress and/or in the process of being implemented. However, we are already seeing improved transparency on whether and how sustainability-related considerations are considered by companies and financial institutions, including investors.
A success is that the EU has certainly inspired other regions in the world to follow suit. The development of the international sustainability reporting standards by the ISSB is a perfect example. We are also witnessing a proliferation of taxonomies that define sustainable economic activities and investments across the globe.
How has Eurosif contributed to the work of the EU around sustainable finance?
Eurosif has been instrumental in advocating for a meaningful and fit for purpose EU sustainable finance regulatory framework. Eurosif has made substantive contributions to the development of various EU sustainable finance rules, including the Sustainable Finance Disclosure Regulation (SFDR) framework, the Corporate Sustainability Reporting Directive (CSRD) accompanied by the European Sustainability Reporting Standards (ESRS), to name a few. These contributions take the form of responses to public consultation, interventions at conferences, workshops, active participation in expert and stakeholder groups (i.e. the EFRAG’s Sustainability Reporting Board) as well as ongoing bilateral meetings and written exchanges.
What do you see as the main strengths of the EU sustainable finance regulation and where do you see room for continued improvement?
The main strength of the EU sustainable finance regulatory framework is its ambition. Among the main achievements has been the introduction of the so called “double materiality” perspective in the EU legal framework. This approach requires companies to consider not only financial risks resulting from sustainability-related events, but also the impacts of business activities on the people and the environment. This perspective is increasingly present throughout EU rules and market practices.
Another strength of the EU sustainable finance framework is that it is comprised of a set of rules, incentives and tools that companies and investors can leverage on. Consideration of sustainability risks has been put front and centre of risk management which makes companies and markets more resilient. The increasing focus on accelerating a just transition towards a sustainable economy, considering the effects of the transition on people, is also very welcome.
Several aspects of the EU sustainable finance rules have room for development, particularly around clarity, consistency and usability. Different EU sustainable finance rules were developed in parallel, meaning that there is a need to improve the consistency of the overall framework. There is also ongoing work on the usability of EU sustainable finance rules. Some reviews are also needed to adjust the rules in view of challenges revealed during their implementation. Finally, there is still room for further development of the framework, in particular regarding the social aspect, which is key for ensuring a just transition.
Switzerland is not part of the European Union, but its financial market is closely intertwined with European markets. Do you see room for different Swiss standards in sustainable finance?
There is room for different national standards reflecting local market specificities. However, investments tend to be cross-border or even global. Therefore, it is in the best interest of financial market participants, including investors, to have as much alignment and interoperability among the standards and rules as possible.
Where do you see Switzerland’s position in sustainable finance compared to other financial centres?
Switzerland is an important financial hub in Europe. Swiss-based investment firms make an important contribution to sustainable investments. Based on the data for 2022, Switzerland is in second place, behind France, in terms of the largest volume of sustainable investments (so called Article 9 funds) as per the definition set out in the EU Sustainable Finance Disclosure Regulation (SFDR).
Given Switzerland’s position in sustainable finance, what topics should SSF focus its resources on?
SSF has played an key role in promoting sustainable investments and raising awareness about their importance among Swiss investors. This work is not yet complete. Especially in the current political context, it is important to create awareness about evidence-based climate science, explaining that the incorporation of sustainability considerations is key for sound risk management, and that negative impacts on the environment and society can in turn into sustainability risks in the mid-to-long term. Considering ever-increasing interest and demand from end investors for sustainable investments, sustainability-related practices and standards should be seen as a value proposition for financial market participants towards their clients.
Looking to the next ten years, where do you see sustainable finance – and SSF?
Hopefully sustainable finance is going to become the new normal. There are still challenges ahead, including political ones, both in Europe and oversees, which have been exacerbated by the forthcoming elections. Meanwhile, as evidenced by climate science, e.g. IPCC (Intergovernmental Panel on Climate Change) reports, climate change is accelerating, and we are running out of time to mitigate it. In this context, organisations like SSF, other national SIFs and Eurosif, have a crucial role to play in terms of engaging with policy makers, regulators, supervisors, and most importantly, the market participants.
March, 2024
