Despite the coronavirus pandemic, ESG (Environmental, Social, Governance) investing is witnessing a robust, growing trend, with Europe leading the way to a greener future. Out of a total of $46 billion in sustainable funds, the United States and the rest of the world account for around 12%, the rest are located in Europe.
The EU Green Deal
Since the presidency of the European Commission changed late last year, the EU announced a Green Deal that is about to shape the way the continent develops. Presented before the coronavirus pandemic, the Green Deal is an ambitious project that aims to make the European Union climate neutral by 2050.
The idea is to boost the green economy by carrying out initiatives to protect the environment. Funding the Green Deal through private and public finance comes as a response to EU-wide polls that revealed a major population concern about climate change and the environment.
The growth of the sustainable funds is remarkable, considering that the European Union and the rest of the world fight a pandemic. Which requires unprecedented amounts of capital to cope with high unemployment and new social distancing measures. Despite that, as the first quarter of the year showed, the Green Deal moves forward, on track to deliver on its promises.
Deutsche Bank recently revealed that it issued its first green bond, placing it successfully in the market. With a tenor of six years and volume of €500 million, it provides a coupon of 1.375%. The proceeds of the issue are used to refinance Deutsche Bank’s sustainable projects such as green buildings or projects in the field of renewable technologies.
The Deutsche Bank example is best to illustrate what the EU Green Deal means for the future of private and public finance in Europe.
As a result of the strong investment appetite for green projects throughout the European Union, both governments and private companies find it easier to raise funds for green projects and thus complying with the European Commission’s tougher requirements in regard to the environment.
Equally important, the pandemic revealed structural flaws in globalization. A post-pandemic reality will see a huge financing gap that needs to be filled somehow. Bringing climate inequities in front may be enough to spur investment from private entities as demand for sustainable investing is poised to rise under the EU Green Deal.