Strategy for Financing the Transition to a Sustainable Economy

Submitted

<p>The strategy outlines how the European Union intends to align finance flows with its climate-neutrality and sustainability goals by 2050. It builds on the existing sustainable-finance framework (taxonomy of sustainable activities, mandatory disclosures, investment tools) and sets four priority action areas: (i) financing the real-economy transition including recognition of transitional activities; (ii) expanding access to sustainable finance for retail investors, SMEs and households; (iii) enhancing resilience and the financial sector’s contribution to sustainability through double-materiality risk integration; and (iv) strengthening global ambition and cooperation in sustainable finance.</p>

Strategy for Financing the Transition to a Sustainable Economy  (EU Sustainable Finance Strategy)

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Aligning the skills of the workforce with the requirements of the just transition.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

A commitment to balance GHG emissions with removal by a certain point in time, effectively reducing the net emissions to zero

This sector creates and distributes information and entertainment through television, radio, print, and digital platforms.

Financial support to help individuals manage the effects of unexpected events, securing their livelihoods and increasing the resilience of people and businesses to the changing climate. It’s especially vital in developing regions where everyday risks, climate-related weather extremes, or crop failures can push people into poverty. Without insurance, people may have to resort to selling assets or cutting consumption to cope with losses.

Actions and measures to adapt and increase resilience of societies and the economy to climate change.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

A financial institution that manages a country's currency and can promote climate-related initiatives through green monetary policy and other means.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

A target to reduce the prevalence of a greenhouse gas over a specific time frame

Activities that involve the cultivation of crops and raising of livestock for food, fibre, and other products essential for human life and industry.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Social protection systems consist of policies that help people manage social risks in order to prevent poverty and maintain decent incomes and living standards

Conditions that enhance the feasibility of adaptation options. Enabling conditions include finance, technological innovation, strengthening policy instruments, institutional capacity, multi-level governance and changes in human behaviour and lifestyles.

A loan is a policy instrument where funds are provided to a borrower with the expectation of repaying the principal plus interest.

This sector provides communication services, software development, and IT solutions.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

This sector involves activities that impart knowledge and skills to individuals, including formal schooling, vocational training and educational support.

Social inclusion is the process of improving the terms on which individuals and groups take part in society—improving the ability, opportunity, and dignity of those disadvantaged on the basis of their identity.

This sector involves activities to move goods and people, alongside the storage of products.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Strategy for Financing the Transition to a Sustainable Economy

Target

Policy instrument

Risk

Impacted group

Just transition

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance