Learn more about the Sustainable Economy and its underlying principles. Discover what Sustainable Finance means, and the provisions of Italian law on this point.

FTA Online News, Milan

The term sustainable economy refers to a type of economy focused on the broader concept of sustainable development.

This economic model requires development based on a rational use of natural resources so that it also permits use by future generations. To ecological and generational responsibilities, new and related social responsibilities have been added over time, including objectives such as combatting poverty and inequality or promoting decent working conditions.

What is sustainable development?

The first official definition of sustainable development is based on the Brundtland report, a document issued in 1987 by the World Commission on Environment and Development (WCED), which introduced the concept of sustainable development for the first time.

“Sustainable development”, the definition subsequently adopted by the UN’s World Conference on Environment and Development, “is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. 

This is the basis for a model for society and economic development that integrates environmental, economic and social aspects in a long-term global perspective for the development of a more equitable, healthy and harmonious society for all, including future generations.

Another fundamental step was taken in 2015, with the United Nations’ approval of the 2030 Agenda, with its 17 Sustainable Development Goals (SDGs), subdivided into 169 associated targets, to be achieved by 2030. The Agenda is an essential reference for combatting climate change, poverty, inequality and promoting peaceful societies that respect dignity and human rights.

For example, the UN targets are used as a reference for corporate reporting, national and international policy makers, think tanks, institutions, and agencies engaging in economic and social topics.

One of the pillars of this new paradigm of sustainable development is the observation of the contradiction between the objective limits of Planet Earth’s resources and the desire for continuous and constant economic growth, based on material consumption of goods and services. The objective of the rational use of environmental resources was immediately linked to the objectives of equity and social inclusiveness and harmonious development of the economy.

What is understood by sustainable finance?

The Global Sustainable Investment Alliance (GSIA) has defined the financial side of sustainable development as follows: “Sustainable finance is the set of investment strategies that consider Environmental, Social and Governance (ESG) factors in portfolio composition and management.”

Like sustainable development, sustainable finance has a long history and challenges the goals and ends of the financial system in a new way. As early as 1928, the Pioneer Fund was born in the United States with an ethical vocation, and in the 1970s, American religious funds and university foundations refused to invest in companies involved in the war effort in Vietnam.

The United Nations has also played a key role here. In 2005, UN Secretary General Kofi Annan summoned the world’s largest investors to develop the six principles of responsible investment.

The first principle requires environmental, social and administrative issues to be incorporated into investment analysis and decisions. This is the famous ESG (Environmental, Social, Governance) paradigm, which still serves as a benchmark for the entire global financial industry today. The financial world is essentially being asked to invest not only from a risk/return perspective, but also taking account of obligations and limits linked to respect for the environment, society and good administration.

Between the great financial crisis of 2008 and the Covid-19 pandemic, sustainability principles became increasingly widespread in corporate reporting and in the body of legislation of major national and international jurisdictions. Europe’s most significant response to the pandemic was NextGenerationEU, a pact of responsibility for future generations and European society, which also aims to establish the megatrends for development in the coming decades, while the financial universe of sustainability already raises several tens of trillions of dollars globally.

Links

ESG | Empowering Sustainable Growth

Sustainable Finance @ Borsa Italiana

In March 2022, Euronext Securities Copenhagen and Clearstream announced that they would expand their long-term cooperation by connecting Clearstream directly to the Danish market. One year later, the two companies can look back on a successful migration and collaboration.

With the migration – successfully completed in July 2022 – Clearstream added the Danish market to its global Investor-CSD solution, offering its clients direct access to the domestic market via their existing accounts. Since that time, the Assets under Custody between Clearstream and Euronext Securities Copenhagen has increased by 35%. Euronext Securities has also expanded the range of services it offers to Clearstream, such as specific custody events and tax services, and added other direct access customers during that time.

The successful, incident-free migration was an important milestone in our expanded cooperation, and it’s very rewarding to look back over a year with increased volume and stable operation.

States Niels Hjort Rotendahl, CEO at Euronext Securities Copenhagen. 

We’ve also seen an increase over the past year in the demand for new services from our customers who want to access the market directly. This fits the trend that we see developing across the European market.

Dirk Loscher, Head of Custody & Investor Solutions at Clearstream, credits the good cooperation between the two companies as a key success factor.

We’ve worked closely with Euronext Securities Copenhagen over the past year to ensure a smooth and successful migration for all of our clients. We are looking forward to continuing to expand Clearstream’s European footprint with our local partners to ensure maximum efficiency and best client experience for the investor and asset servicing community.

Contact:

Henrik Ohlsen - Head of Nordic Client Relations & Sales Euronext Securities -  HOhlsen@euronext.com

How can the institutional market join the dots to encourage Retail investor access?

Euronext’s Dirk Donker joined The TRADE’s Retail Roundtable to discuss the ever-growing rise of retail, one of the industry’s hot topics in 2023 both from an innovation and regulatory standpoint.

They pointed out the differences in retail investment culture in Europe, the UK, the US and Asia, how market participants increasingly recognise the importance of treating retail investors equally and how beneficial retail engagement is for market liquidity, resulting in a greater need to explore the current barriers to entry and outline a roadmap for future progress.

At Euronext, we believe that retail investors are crucial to a diverse and healthy liquidity, one of the key factors of Euronext’s market quality, and that education is of vital importance to raise awareness for the various investor profiles, as was demonstrated in a survey with retail investors Euronext conducted jointly with ABN Amro.

In line with Euronext’s commitment to facilitate retail investor access to financial markets with superior market quality, Euronext is continuing to innovate with:

• The expansion of its Global Equity Market (GEM), a one-stop-shop MTF that enables retail investors to trade a wide variety of pan-European and US stocks, also with a Trading After Hours session running until 20:30 CET

• The growth of Best of Book, its best execution service for retail flow, which Euronext is working on extending in Italy and making more accessible to its retail members in light of increasing competition

Watch the four instalments of the roundtable here:

 

Episode 1

Unpacking the global landscape

Why and how markets differ from region to region

Episode 2

A closer look at behaviour patterns

How, when and what those active in these markets trade

Episode 3

The evolution of institutional access

How do they interact with the retail market and the importance of execution/price transparency

Episode 4

Regulatory hurdles

The dream of harmonisation in Europe, data access and post-trade

Thank you Annabel Smith (The TRADE), Wail Azizi (Equiduct), Nicky Maan (Spectrum), Martin Hendry (Liontrust Asset Management PLC) for these insightful interactions.