European Capital Markets Institute

CEPS-ECMI Research Report: Derivatives in Sustainable Finance

In recent years, sustainability has risen in scope and importance on the agenda of policymakers. In Europe, this has translated into the EU Sustainable Finance Action Plan, which aims to: i) reorient capital flows towards sustainable investments; ii) manage financial risks stemming from climate/environmental/social issues; and iii) promote transparency and long-termism in financial and economic activity.

A market that could play a significant role towards Europe’s green transition is derivatives. The market has been tightly regulated since the 2007-08 financial crisis, making it safer and more transparent. Derivatives facilitate capital-raising via the hedging of risks related to sustainable investments. Moreover, they enhance the transparency and the price formation process of the underlying securities, and thus foster long-termism.

This report highlights how derivatives markets can – through their forward dimension, their global and consolidated nature, and their proper regulation – contribute to: i) enabling the EU to raise and channel the necessary capital towards sustainable investments; ii) helping firms hedge risks related to ESG factors; iii) facilitating transparency, price discovery and market efficiency; and iv) contributing to long-termism.

Recent Publications

UK financial services should shift focus away from equivalence

Published in:

Commentaries

07.04.2021

After nine rounds of negotiations that took more than six months (March-October 2020) and covered eleven areas, the EU-UK Trade and Cooperation Agreement (TCA) concluded on 24 De

Can responsible investing encourage retail investors to invest in equities?

Published in:

Commentaries

16.03.2021

The low participation of retail investors in the equity market is a concern for many countries.

On the fringes: EU-UK financial services under the TCA

Published in:

Commentaries

05.03.2021

The outcome of the Trade and Cooperation Agreement (TCA) for trade in financial services between the EU and UK deal was even more paltry than expected.

2020 ECMI Statistical Package: key findings

Published in:

Research Reports

10.02.2021

This report provides an overview of the key findings of the ECMI Statistical Package 2020, a comprehensive and annually upd

More publications

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