No time to lie: Sustainable finance needs nextgen assurance

Abstract

The sustainability transition requires huge investments from both the public and private sectors. Covid-19 recovery packages can boost the transition. But reliable investment assurance and impact monitoring systems are also needed to guide sustainable investment and ensure that the ambitious goals are met. Current decision-support tools suffer from a severe credibility deficit, mainly due to methodological and computational limitations. Despite considerable progress, issues concerning lack of transparency, accuracy, comprehensiveness, and quality persist. In this opaque context, regulators are imposing new disclosure obligations. The European Commission, for example, is developing a taxonomy for sustainable activities. In parallel, the International Organization for Standardization is developing principles to guide sustainable finance. In addition to robust standards and metrics, other enabling conditions are required to trigger the necessary behavioural changes and scale up funding to accomplish the sustainability transition. This includes institutional frameworks and governance mechanisms to ensure a fair distribution of sustainability burdens, costs, and benefits among all stakeholders. For a lasting and long-term recovery it is essential to take an integrated approach to sustainability and impact assurance, one in which no environmental impacts, social consequences, or economic externalities are ignored. Natural capital assets could be managed as Common Asset Trusts for the benefit of all current and future generations. The oceans, for instance, are custodians of a large and partly undiscovered natural capital that is essential to humanity, biodiversity, and climate regulation. Transitioning to a sustainable blue economy requires such innovative governance solutions, targeted investments, and nextgen impact assurance.