Sustainable finance

The decarbonisation of our economy will not be possible without a significant flow of public and private investments into sustainable economic activities.

What's happening

A major wave of investments is necessary to accelerate the electrification and decarbonisation of cars, planes, ships, trucks and other transport modes.

To expedite the climate and energy transition, it is crucial that this money goes in the right places.

Currently, most capital supports non-compatible sectors, hindering progress towards a net-zero world.

Consumer demand has prompted the financial industry to offer sustainable finance products. However, conflicting standards, lobbying and greenwashing impede capital flow.

€600 bn Additional investment needed each year up to 2030 to fulfil the EU’s climate commitments

What needs to be done

There are at least three areas that need tackling immediately:

  • Leverage public finance to steer a net-zero transport sector by 2050

  • Decarbonise the financial sector

  • Increased transparency, including improved disclosure of companies and funds’ sustainability data

Public investments

Decarbonising Europe’s economy by 2050 will require significant investments in green technologies. Transport has a lot of work to do.

Public finance plays a crucial role in the decarbonisation of our economies to back non-bankable projects, support households, steer a just transition and leverage private investments. T&E promotes EU-level investments in support of the greening of European industry and the rapid deployment of clean technologies across the EU, from electric vehicles, batteries and minerals to grids and green hydrogen fuels for aviation and shipping.

T&E calls for the European Union to develop a long-term investment strategy, starting with a €1 trillion package for the period 2025-2034. The EU budget, public banks and national budgets should collectively support the achievements of the EU climate objectives.

EU taxonomy

The EU Taxonomy Regulation is designed to support the transformation of the EU economy to meet the Green Deal’s objectives, including the 2050 climate-neutrality target.

The EU Taxonomy’s original goal was to create a single binding definition of what is considered environmentally sustainable, providing clarity for companies, capital markets and policy makers.

However, its controversial Complementary Delegated Act (CDA), adopted in July 2022, classifies certain uses of gas as environmentally ‘sustainable’.

For this reason, four environmental NGOs, including T&E, took the European Commission to court to stop the EU from labelling fossil gas as ‘sustainable’ in its sustainable finance rulebook.

The desired end result would be a ruling that forces the Commission to review the Complementary Delegated Act.

Green finance and sustainability disclosures

The future impact of sustainable finance in Europe relies heavily on the quantity, quality and visibility of disclosed sustainable data and information.

To ensure that the capital is truly steered towards sustainable activities, all the relevant stakeholders, including corporates, public interest companies, banks, financial institutions, , need to report on their E, S and G risks and impacts.

The Corporate Sustainability Reporting Directive together with its European Sustainability Reporting Standards lays down the foundations to hold companies accountable for their impact on the outside world and make them more transparent. In the past years, T&E has been supporting the European standard-setter EFRAG to develop the first set of standards and is now directly involved in the drafting of the sector-specific standards on transport.

ESG ratings

If Europe is to deliver on its ambitious Green Deal commitments and become climate-neutral by 2050, the creation of harmonised rules for Environmental, Social and Governance (ESG) ratings is crucial.

ESG ratings are currently developed by a plethora of rating agencies. Far from offering a solid, indisputable assessment, these ratings often diverge considerably. The divergence in methodologies used by rating providers means that companies with questionable environmental credentials can often appear sustainable.

Double materiality remains a key issue. Today, many ESG ratings only focus on the financial materiality of ESG factors. That is the companies’ risks deriving from E, S and G factors and the impact on their performance rather than on the social and environmental impact of companies’ unsustainable activities.

The EU ESG Ratings Regulation was approved in April 2024. Here’s how things look today.