European Union’s Green Deal and Sustainable Finance

Abstract

The European Union (EU) unveiled the European Green Deal (EGD) in the year 2019 with the aim of transforming the union into a climate-neutral economy by 2050. The European Union’s Green Deal aims to mobilize private capital toward sustainable investments in this regard, and to ensure that the financial system is resilient to environmental risks. Hence, sustainable finance is a crucial part of the deal. This paper explores the EU's Green Deal and its sustainable finance agenda. The first two sections provide a comprehensive overview on the background and the significance of the EU’s Green Deal and its sustainable finance agenda, while underlining the theoretical and the practical ramifications of directing private money toward sustainable investments and making sure that the financial system is resistant to environmental threats. The Taxonomy Regulation, the Green Bond Standard, the Sustainable Finance Disclosure Regulation, and the Non-Financial Reporting Directive are a few of the regulatory tools and data sources for the EGD’s sustainable financing framework, and these are covered in the third section of this study. The fourth section discusses the conditions for a sustainable finance agenda for required for implementing the EGD, and the fifth section elaborates on the challenges to be faced along the process. The paper's key conclusions, which are presented in the final sixth section, include the necessity of harmonizing and standardizing sustainable finance processes, the significance of high-quality environmental, social and governance (ESG) data, and the implications for the financial sector, businesses, and investors.