16 trillion euros are currently in circulation in the eurozone - 1.5 trillion of which is visible money in the form of coins and bills. The remainder is in the custody of banks and investors - as short-term demand deposits or long-term investments. These figures make it clear: Those who manage financial flows - such as banks and investors - not only can create and preserve value, but can also shape sustainability and climate protection. Even we consumers have the opportunity to use our money in a more sustainable and climate-friendly way. However, the financial sector itself - banks, financial service providers, investors and insurance companies - has the greatest leverage. Here too, economy and ecology must move much closer together. This is because the financial sector and the money it uses facilitate cross-border trade and promote and enable economic activities. This makes it a decisive factor in the global transformation of industries towards more climate-friendly business models.
Sustainability is a corporate value
There are many challenges when it comes to sustainable finance. There are also enormous opportunities for everyone involved, especially for companies, to increase their own corporate values and reputation in the long term and strengthen their resilience to crises by contributing to greater sustainability and climate protection.
However, establishing rules and agreements on how the financial world can make its contribution to greater climate protection and sustainability is proving to be no easy task. Many interests come together when it comes to shaping a modus vivendi: Companies who are already committed to greater sustainability in their supply chains, the financial market, which comes from the world of risk assessment and for which sustainability must pay off, as well as politics with its mandate to set a framework for achieving targets and then to enforce this framework so that targets are also achieved.
Regulation is good – Standards are better
Today, in 2023, we can see that sustainability, climate protection and the achievement of climate targets cannot be achieved without the financial sector. The EU has recognized this and, in my view, is currently one of the political drivers of sustainable finance at international level with its Green Deal. The declared goal of the Green Deal: more transparency, greater standardization and efficient risk management for sustainable economic activities. The political players have set the framework with the EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).
One of the major challenges here is the lack of uniform global standards for sustainable financial products and services. For example, the lack of clear definitions and criteria makes it difficult for companies to assess which investments actually have the desired positive impact on the environment and society – despite the existence of ESG criteria for sustainable corporate strategies. Regulatory requirements on the part of policy-makers or top-down targets and voluntary commitments at company level must be broken down into individual targets so that these can be measured and transparently tracked for each location, product line or supplier. This requires guidelines and standardized evaluation criteria, without which practical implementation and effectiveness testing of the transformation to a sustainable company would be difficult. This is precisely where I believe standardization can play a decisive role.
Mutual rule-making or – to stay with the metaphor – the bottom-up development of technical standards can provide enormous support here. It does not have to and should not primarily be about developing new standards. Rather, the aim is to make the existing body of standards fit for the future. We could achieve this, for example, by supplementing existing standards with climate aspects and, in particular, the effects on CO2 emissions. Supplemented by these aspects, technical standards can become the knowledge base for implementing top-down sustainability goals in a practical manner and according to uniform international benchmarks.
The availability and quality of data as well as consistent metrics, for example for measuring the carbon footprint, are crucial for this. These metrics are essential for sustainable financial decisions. In my view, a cross-industry approach with standardized key figures is needed to ensure comparability and thus achieve tangible effects.
Common sense for sustainable finance
Sustainable finance is one of the key factors in shaping the green transformation. The cooperation of all stakeholders is needed for sustainable finance to develop its full potential and power.
We want to bring together the two worlds of "top-down" regulation or individual self-commitment, and "bottom-up" technical standardization with the aim of making both approaches compatible with each other. Our offer to all stakeholders, companies, the financial sector and policy-makers is therefore as follows: Use the infrastructure provided by DIN and established processes for exchange. Use our international standardization network for your dialogue and the creation of a common sense for sustainable finance.
This is precisely why we founded the DIN Standards Committee Finance – NAFin for short – in October 2023. This standards committee is one of DIN’s 69 committees in which various interest groups from business, associations, politics and consumer protection organizations come together. Its main task: The development of uniform procedures in various areas of finance in the form of jointly developed standards and specifications, also those supplemented by sustainability aspects. Standardization is therefore an established offer to you, dear financial sector, to make a difference with your commitment towards a sustainable and more climate-friendly future on our planet Earth.