Over the past year, for the first time, global sustainable fund flows contracted, with a net outflow of $2.5 billion. This decline signals a time for reflection amid a global economy grappling with complex challenges, ranging from fears of an impending recession to rising inflation and interest rates.
Despite the uncertain global landscape, Europe manages to maintain positive net flows of sustainable investments, with $ 3.3 billion in inflows last year, albeit down from the previous quarter.
These data emerge from the Second Annual Report of the Observatory on Impact Finance and its Economic Spillovers (O-Fire), an initiative launched by the University of Milano-Bicocca in collaboration with Banca Generali Spa and the Italian Association of Private Equity, Venture Capital and Private Debt. The report highlights a Europe moving toward a strengthened regulatory framework for sustainability.
In fact, with the introduction of the Environment Delegated Act and the Corporate Sustainability Reporting Directive (CSRD), the European Union is aiming toward greater transparency and corporate social responsibility, forcing nearly 50,000 companies to adhere to the European Sustainability Reporting Standards.
The report also stresses the vital importance of investments in renewable energy sources for the energy transition and the achievement of sustainable finance goals.
Significant challenges are faced, however, such as the impact of climate change on energy production, which could affect global supply and demand balances. Adaptation to climate change emerges within the pages of the report as a pressing need, requiring considerable financial commitment. Targeting resources to specific interventions, such as natural disaster prevention and food security, is critical to mitigating the effects of climate change.
“The findings from the report underscore the challenges and opportunities that lie ahead on the road to a more just and equitable ecological transition,” commented Giovanna Iannantuoni, dean of the University of Milano-Bicocca and president of Musa.
“It is significant to observe how, despite economic and geopolitical turmoil, ‘Europe continues to demonstrate a unique resilience in maintaining positive net flows of sustainable investments. This is a clear indicator of the continent’s commitment to long-term sustainability goals, even in uncertain times. However, the global decline in sustainable fund flows reminds us that the path to sustainability is littered with challenges that require attention, innovation, and international cooperation. This report not only highlights the progress that has been made but also the areas where we need to focus our efforts more. It is through this awareness and understanding that we can mobilize concrete actions to address the most pressing challenges of our time, for a collective commitment to finance that is truly sustainable, inclusive and capable of addressing the challenges of our century.”
