ISFCOE Research Insights Monthly Digest: January 2025
At the International Sustainable Finance Centre of Excellence (ISFCOE), we focus on research and innovation to shape the future of sustainable finance. Aligned with Ireland’s National Finance Strategy, our work supports policy development, drives forward the Sustainable Finance Roadmap, and helps create financial mechanisms that enable a more sustainable economy.
Over the past four years, we have provided evidence-based insights to inform public discourse and policymaking. As a knowledge hub, we track global sustainability trends, bringing together the latest research and industry developments.
This digest highlights notable reports and updates from Ireland and beyond, providing a resource for those working in sustainable finance.
Building Trust in Transition: Core Elements for Assessing Corporate Transition Plans
The EU Platform on Sustainable Finance (PSF) has published a report outlining key elements for assessing corporate transition plans. It is designed to support companies in developing their plans and to help financial market participants evaluate them effectively.
The report provides an overview of the EU legal framework on transition plans and includes recommendations to the European Commission for targeted policy interventions. While its primary focus is on climate mitigation, it also acknowledges the need to address other environmental objectives, such as adaptation.
As an advisory body, the PSF supports the Commission in implementing the EU Taxonomy and refining the broader sustainable finance framework. In December 2024, its mandate was extended by three months, until March 2025, to allow for the completion of outstanding work.
The Resilience Effect: 10 Super Levers to Catalyse Finance in Climate-Vulnerable Countries
Commissioned by the Climate Vulnerable Forum-Vulnerable 20 Group (CVF-V20) and the Bridgetown Initiative, this report examines the financial challenges faced by climate-vulnerable nations and the strategies needed to unlock investment.
Extreme weather events continue to set new records. In 2024, hurricanes, floods, droughts, and landslides have devastated lives and infrastructure worldwide. Food crises, conflict, and migration have intensified due to prolonged drought and heat stress. The ten most costly climate-related disasters this year have exceeded $200 billion, a figure that is rapidly becoming the new norm.
While climate disasters affect many regions, V20 countries – 70 nations highly vulnerable to climate shocks – bear a disproportionate burden. Despite their limited historical responsibility, they face significant financial barriers to building resilience. Estimates suggest that $490 billion per year in climate finance will be needed by 2030, yet these nations struggle to secure the necessary investment due to rising disaster recovery costs, constrained fiscal capacity, and restricted access to affordable capital. At least a quarter of V20 countries are already in or at high risk of debt distress.Energising Private Capital: Innovations in Guarantee Offerings for Climate Finance
This issue brief, produced by the Climate Policy Initiative (CPI), explores the barriers to adopting green guarantees and highlights solutions to overcome them.
The research draws on expert discussions hosted by the Green Guarantee Group (GGG), as well as interviews with guarantee providers featured in the case studies. It outlines key takeaways, recommendations, and policy questions for further consideration.
The findings are intended to support governments, multilateral development banks (MDBs), development finance institutions (DFIs), guarantee providers, and policy advisers in improving the design and implementation of green guarantees. MDBs and DFIs can apply these insights to enhance their financial products, while guarantee providers can use the case studies to refine and scale their offerings.
Sustainable Banking and Finance Network: Global Progress Brief 2024
The Sustainable Banking and Finance Network (SBFN) has released its 2024 Global Progress Brief, alongside the launch of a new Data Portal – a platform for tracking member countries’ progress in sustainable finance.
As global challenges intensify, collective market leadership and continuous improvement are essential. The sustainable finance landscape is evolving rapidly, with advancements in technology and shifting market dynamics requiring countries to adapt quickly.
To better capture these developments, the 2023 update of the SBFN Measurement Framework expands its scope to include nature-related risks, just transition, and social impact. This framework helps align policies with international trends while assessing their real-world impact, including changes in market behaviour.
The 2024 Global Progress Brief benchmarks sustainable finance initiatives across 66 member countries, highlighting key achievements, innovations, and opportunities in Emerging Markets and Developing Economies (EMDEs). It evaluates progress across three key pillars:
- Environmental, Social, and Governance (ESG) Integration
- Climate and Nature-Related Risk Management Financing
- Sustainability
– SUSTAINABLE FINANCE NEWS ROUNDUP
ECB Paper Highlights Shortcomings in EU Green Finance Rules
A new paper from the European Central Bank (ECB) highlights gaps in the EU’s sustainable finance regulations, warning that current rules may be limiting rather than enabling green investment. According to the paper, the EU needs an additional €558 billion per year in investment to meet its 2030 climate targets. While sustainability reporting rules are designed to support private investment, the ECB warns that their complexity and high costs may be counterproductive. The paper cites the EU Taxonomy as an example, noting that its high thresholds for defining sustainable investments could restrict capital flows.
Six Major US Banks Exit Net Zero Alliance Ahead of Trump’s Inauguration
The six largest banks in the United States have withdrawn from the UN-sponsored Net Zero Banking Alliance (NZBA), amid expectations that the incoming Trump administration will take a less climate-focused stance. JPMorgan Chase was the latest to exit, following Citigroup, Bank of America, Morgan Stanley, Wells Fargo, and Goldman Sachs – all of whom have left since early December. The NZBA, convened by the UN Environment Programme Finance Initiative, commits banks to aligning their financial activities with net-zero emissions by 2050. Citigroup, a founding member, stated that its decision to leave would allow it to focus on mobilising capital for emerging markets in support of the low-carbon transition.
Top 10 Trends in Responsible Investment in China for 2025
Key trends in responsible investment in China point to a growing focus on transition finance and EU-China cooperation, despite rising global protectionism. Geopolitical tensions and regulatory shifts are shaping the ESG landscape, with US institutions adopting a ‘greenhushing’ approach – avoiding overt ESG commitments while still integrating climate considerations into investments. In contrast, China and the EU are expected to strengthen sustainable finance collaboration, particularly through initiatives such as the Common Ground Taxonomy (CGT). However, trade frictions could emerge, especially in electric vehicles and critical minerals, where ESG factors might be leveraged as trade barriers.PRI Publishes Brief on Sustainable Finance Policy Developments
The Principles for Responsible Investment (PRI) has released an update on sustainable finance policies, highlighting that 60% of policies now focus on supporting the economic transition. The latest PRI regulation database underscores the growing emphasis on creating an enabling environment for investors, helping them manage financial decisions that align with sustainability goals.
With sustainable finance policies increasingly linked to economic transition, effective reform requires a cohesive, system-wide approach. The report stresses the need for whole-of-government strategies that integrate financial policies with broader societal challenges, including net-zero commitments, competitiveness, nature conservation, and human rights.
New Analysis: Climate and Health Finance Reaches $7.1 Billion in 2022, but Gaps Remain
A new analysis by The Rockefeller Foundation reveals that international finance for climate and health reached $7.1 billion in 2022, a significant jump from less than $1 billion in 2018. The white paper, Resourcing Climate and Health Priorities: A Mapping of International Finance Flows from 2018-2022, highlights the growing recognition of the climate-health nexus among global finance partners.
However, despite this progress, funding remains difficult to access for the most climate-impacted countries. The analysis found that:
- Less than 35% of finance from bilateral donors is directly allocated to recipient countries.
- Less than 50% of total funding flows to low-income nations.
These findings highlight the need for more direct and accessible financing to ensure climate and health resilience where it is needed most.
