In the last few years, while multiple countries have made progress in developing sustainable-finance plans to help direct investment to climate solutions and environmentally beneficial companies and products, the United States, under the administration of former President Donald Trump, moved to weaken environmental regulations and discourage sustainable investing. With the arrival of President Joe Biden’s administration, the United States could rapidly roll out policies to make up lost ground.

Sustainable-finance plans advance globally

Around the globe, countries are stepping up to implement plans to embed greater sustainability, particularly climate change, into their financial industries. The plans are most advanced in the European Union (EU), the United Kingdom, Australia and Canada.

The European Union’s Action Plan for Financing Sustainable Growth, announced in March 2018, set a series of deadlines to help the European Union achieve its objective of net-zero carbon emissions by 2050. The plan requires all EU-listed companies with more than 500 employees to disclose how much of their revenue is generated from green activities and the extent to which their capital expenditures meet green criteria.

Beginning in March of this year, financial institutions, asset managers and financial advisors that claim that their activities, funds or investments have environmental benefits will have to disclose data to justify those claims. Henceforth, they will be required to produce annual reports to back up these claims by citing up to 50 indicators defined by the EU regulators.

The EU disclosure rules also will require large asset managers and asset owners to show how they practice due diligence to mitigate climate risks and other sustainability concerns, including through their shareholder-engagement activities.

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