A recent PwC study has uncovered a striking deficiency in the alignment of financial institutions’ activities with the EU’s taxonomy for sustainable activities.
According to Environmental Finance, the report finds most financial undertakings and investments are far from aligning with the sustainable transition goals set by the European Union.
The study focused on how banks, insurers, and non-financial corporates measure up against the EU taxonomy benchmarks using indicators such as the Green Asset Ratio. The findings reveal that for banks, both turnover-based and capital expenditure-based alignment measures are dismally low at an average of 2%. This figure varies slightly across countries, ranging from 0% to 13%.
In the insurance sector, the scenario is equally grim. The average taxonomy alignment for underwriting activities stands at just 2%. When it comes to insurers’ investments, the alignment is nearly non-existent for exposures to financial undertakings and only marginally better for non-financial corporates, with turnover-based and capital expenditures-based key performance indicators (KPIs) at 4% and 5% respectively.
Among non-financial corporates, it was observed that utilities and companies within the energy and resources industries exhibited higher levels of taxonomy alignment, indicating some sectors are more advanced in integrating sustainability into their business practices.
The PwC analysis encompassed a broad survey covering 12 countries across the EU, and included data from 530 non-financial and 97 financial companies.
“PwC analysis shows that there is a significant journey ahead to direct financial flows towards sustainable transition,” PwC partner, Mark Wright, said. “This research underlines the urgent need for financial institutions to recalibrate their strategies towards sustainability.”
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