Sep 18 / Evdokia Pitsillidou

Sustainable Finance & ESG Factors: A comprehensive overview

The transition towards a greener and more sustainable economy has emerged as a top priority for both the European Union and its financial markets. The changing preferences of investors, who now seek financial products and services that integrate environmental, social, and governance (ESG) factors, necessitate the adoption of a dedicated regulatory framework.

In this blog post, the Institute's instructor, Evdokia Pitsillidou, introduces the concepts of sustainable finance and ESG factors. In this respect, a comprehensive course titled Sustainable Finance: Regulatory Framework & ESG Factors is offered through the IforPE platform.

The course builds upon the concepts of sustainable finance and ESG factors, discussing the regulatory actions taken at the European level and what financial institutions can anticipate in the near future. Towards the conclusion of this blog post, we provide you with detailed information about the knowledge and competencies you will acquire upon completing the course.

What is Sustainable Finance?

Sustainable finance involves incorporating environmental, social, and governance considerations into the decision-making process within the financial sector. This approach to investment decisions has increased long-term investments in sustainable economic activities and projects.

To this end, the essence of the term "sustainable finance" encompasses the following key components:

  • Redirecting Private Capital: The redirection of private capital towards more sustainable investment opportunities.
  • Sustainable Growth and Long-Term Development: Embracing sustainable practices that foster long-term economic development and growth.
  • Financial System Stability: Ensuring the stability of the financial system through sustainable financial practices.
  • Financial System Transparency: Enhancing transparency within the financial system to build trust and accountability.
  • Risk Management: Identifying and effectively managing the risks associated with environmental and social issues.

ESG Factors

ESG factors encompass environmental, social, and governance considerations that can either positively or negatively affect the financial performance or solvency of an entity, a sovereign, or an individual. These factors are typically divided into three main pillars:

  • Environmental Pillar: This pillar focuses on issues related to the environment, including climate change, greenhouse gas emissions, energy consumption and efficiency, exposure to fossil fuels, and pollutants affecting water, air, and soil, among others.
  • Social Pillar: This pillar covers matters such as child labor, inclusiveness, inequality and discrimination, human rights, investments in human capital and communities, and concerns about trafficking in human beings, among other social issues.
  • Governance Pillar: This pillar addresses topics like corruption and bribery, transparency and disclosure, board structure and diversity, the unadjusted gender pay gap, and internal audit practices, among other governance-related aspects.

In this context, ESG risks refer to the potential negative financial impacts on an institution arising from the current or future effects of ESG factors on its counterparties or invested assets. Therefore, incorporating ESG factors into the structuring of investment portfolios can contribute to better long-term performance.

What is the Sustainable Finance: Regulatory & ESG Factors course and what does it include?

The Sustainable Finance: Regulatory Framework & ESG Factors course is developed by SALVUS Funds and delivered by their Risk & Compliance Directors, Evdokia Pitsillidou. The course is designed to offer professionals working in Cyprus Investment Firms and Funds, as well as Payment Institutions, a thorough understanding of the European regulatory framework surrounding sustainable finance.

Learners who undertake this self-paced, self-study course will be introduced to the core principles of sustainable finance and ESG factors, gaining valuable insights into the drivers behind the EU Green Deal. Most importantly learners will acquire a thorough understanding of existing regulatory obligations and be equipped with a competitive advantage in anticipated regulatory developments.

The syllabus of the Sustainable Finance: Regulatory Framework & ESG Factors course includes:

  • Introduction to Sustainable Finance and ESG Factors
    - What is Sustainable Finance?
    - What are the ESG Factors?
    - Why are SF & ESG considerations important? 
  • The road to the EU Green Deal
    - The UN 2030 Agenda
    - The Paris Agreement
    - The European Green Deal
  • Sustainable Finance Regulatory Framework
    - Sustainable Finance Regulatory Framework
    - Sustainable Finance Disclosure Regulation
    - EU Taxonomy Regulation
    - Non-Financial & Corporate Reporting Directives
    - CRR & IFR Prudential Disclosures
    - Benchmark Regulation
    - ESG Rating Activities Regulation
  • Sustainable Finance Disclosure Regulation
    - Aim & Objectives
    - Who is obliged under SFDR?
    - SFDR significant provisions
    - SFDR Regulatory Technical Standards

  • EU Taxonomy Regulation
    - Aim & Objectives
    - Where does the EU Taxonomy apply to?
    - Environmentally sustainable economic activity
    - Technical screening criteria
    - Transparency obligations
  • CRR & IFR Prudential Disclosures
    - ESG Disclosures for financial institutions
    - ESG Disclosures under Pillar III
    - ESG Disclosures for Investment Firms
  • MiFID II, AIFMD & UCITS Directive enhancements
    - MiFID II enhancement
    - AIFMD enhancement
    - UCITS Directive enhancement
    - Greenwashing
  • ESG Investing Strategies
    - Negative screening
    - Norm-Based screening
    - Best-in-Class
    - ESG integration
    - Active ownership
    - Thematic investment
    - Impact investment

The material of the course is delivered in PDF slides and online video recordings. Learners registered for this course are provided with the flexibility to learn wherever and whenever.

Upon completion of the course, learners have the opportunity to assess their understanding of the covered material by answering a series of questions reflecting the gained knowledge.

The completion of this course counts towards the Continuous Professional Development (CPD) annual requirements for professionals, and holders of the CySEC Advanced and Basic certifications.
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