Against a backdrop of an increasing amount of investment dollars going to support private sector sustainability ambitions, the Luxembourg Sustainable Finance Initiative (LSFI) has created a new digital ‘Take Action’ toolkit. Its goal? To provide practical instruments for financial professionals, from asset managers to banks to individuals, to help them navigate the complex landscape of sustainable finance and, in turn, continue its growth.
“There is no other similar toolkit which covers these concepts comprehensively while gathering an extensive list of available instruments and their use,” said Nicoletta Centofanti, sustainability adviser at LSFI, which is a non-profit association that designs and implements Luxembourg’s sustainable finance strategies.
“While studying the market, we saw that there were many different sorts of instruments, so we decided to give an overall structure to help guide users to better identify the what, the why, and the when for each of these,” Centofanti said during a recent webinar introducing the toolkit. These instruments have been structured for the first time, she added, in a series of user-friendly webpages that will be helpful for finance professionals “who would like to take a stand for more sustainability,” she said.
To create the toolkit, Centofanti and her team mapped the dozens of other pre-existing initiatives, frameworks, principles, standards, reporting system and tools related to sustainable finance. Initiatives, like Business for Nature, can provide collaborative support and guidance to an organization or financial institution trying to adopt policies to reverse nature loss. Others, like Climate Analytics and Global Forest Watch, help measure and report using science-based data.
These initiatives serve as platforms for sharing best practices, challenges and solutions. They are now collated on the LSFI Take Action webpage, which allows users to filter them by target, theme and region. A scroll-down menu offers an array of different options to suit a range of environmental, social and governance (ESG) goals. “If a financial institution is interested in a certain topic, it could effectively join one of the initiatives that we mapped,” said Centofanti.
The other LSFI toolkit instruments – frameworks, standards and tools – can support financial institutions in a different way. Frameworks provide high-level guidance on how to streamline sustainable finance across an organization, from governance to disclosure mechanisms. When making investment decisions, an organization could decide to follow a framework that embraces a wide spectrum of sustainability goals or that focuses on one specific criteria, such as climate change, biodiversity or human rights.
Standards and reporting systems are essentially requirements that help organizations collect, report and disclose information in a harmonized and consistent way. Provided by organizations such as the International Union for Conservation of Nature (IUCN) or the Partnership for Carbon Accounting Financials (PCAF), for example, standards are useful when an organization or financial institution needs to report and track progress on its commitments.
“Some of these standards may also be applied by companies,” said Centofanti. “Therefore, financial institutions could use these standards as a reference or as a way to ask for information from a company that adheres to a standard or reporting system in a standardized, structured way.”
The collated tools, lastly, help users collect data and information, classified by type. Examples include The Capitals Coalition’s Biodiversity Guidance Navigation Tool, the World Wildlife Fund’s Water Risk Filter, and many others. “Tools offer financial institutions, as well as companies and other organizations, scientifically-based, harmonized data,” said Centofanti.
“The tools we selected are all free, transparent methodologies that are accessible to anyone,” she added. They can be both online platforms and Excel-based tools that can be downloaded and used offline.
The Take Action toolkit is living, said Centofanti, stressing that it remains open to feedback and ways its users see that it can improve. “This is a pilot, and we aim to gather feedback and make a review in six months’ time to make sure we update all the information and numbers we have collected.”