In translation, as in philosophy, it is important to define the word that we intend to translate or that is the subject of our thesis. So, what does the term “sustainable finance” mean?

This concept, sometimes called “responsible finance” or even “green finance”, has been a feature in financial circles for some time, but it remains rather vaguely defined. Over the last decade, it has slowly become more widely known among the public.

On 25 September 2015, the UN was the first to formally define the topic, and this was soon to be seized upon by the EU, which applied it above all to the world of finance. For the UN, it was all about adopting the Sustainable Development Agenda and its 17 goals to be achieved by 2030.

Just two months later, at COP 21, the legally binding Paris Agreement was signed with the aim of limiting global warming.

Building on this foundation, the EU developed and then adopted

Regulation (EU) 2019/2088, better known by its initials SFDR, which stand for Sustainable Finance Disclosure Regulation. Furthermore, the famous taxonomy adopted by the EU in 2020 played a key role in popularising the concept.

Since these texts intersect with one another and are inextricably linked, the comprehensibility of the concept may suffer as a result. 

The website of the French Financial Markets Authority (AMF),

which polices the sector in France, gives one of the most concise definitions of sustainable finance:

“Sustainable finance is a generic term referring to practices that take into account ‘non-financial’ criteria in addition to financial criteria in analysing, selecting and managing investments.”

The most commonly encountered three-pronged approach is ESG, which stands for Environmental, Social and Governance. Although

not the only criteria, these three form the most widely used instrument to determine the sustainable nature of an investment or strategies in this area.

Rather than acting as an exhaustive and legally binding document with full global reach, the SFDR offers European players a useful and flexible regulatory framework. In particular, it leaves the definition of this “sustainable nature” at the discretion of the investor. As for the taxonomy, it details specific requirements to be met, particularly with regard to carbon neutrality, a cornerstone of the action taken by companies wishing to show off their green credentials in order to attract investors.