Building Long-Term Trust in Sustainable Finance

Abstract

The article considers the main techniques for establishing the kind of long-term trust that is necessary for making responsible investments that are consistent with the principles of sustainable development and that will produce the long-term value which is the main goal of corporations participating in sustainable finance. The creation of such techniques is being carried out in close cooperation with international financial organizations and market participants. In order to make current thinking about sustainable financing more systematic, especially as it applies to building long-term trust, the author has concentrated on providing useful descriptions. The article describes the current progress toward standards for the disclosure of non-financial information by corporations; creation of taxonomies for sustainable activities and their application in financial markets; introduction of verification that corporate activities comply with the taxonomies for sustainable activities; and the development and use of ESG ratings in responsible investment. The main research method is analysis of documents of international (including financial) organizations, associations of financial market participants, large business associations, development institutions, and rating agencies. The problematic areas of the mechanisms being constructed are identified (primarily with respect to disclosure of non-financial information and the development of ESG ratings), and the article provides recommendations from international financial organizations on how to overcome the problems identified. The process of developing standards for disclosure of non-financial information and ensuring its reliability, both of which are necessary for sustainable investment, is proceeding rapidly. The article is addressed to a wide variety of readers, who should find it useful for learning how sustainable finance principles are being put into practice by corporations and financial markets. The information in this article can be used for developing strategic economic policy where it intersects with sustainable development.