Sustainability – the only way forward

Sustainable finance has, after many years of debate and consideration, finally come to the forefront of discussion and regulation within the EU, most notably through the emergence of the European Green Deal, which most recently launched a €1 billion call for research and innovation projects that respond to climate crisis and help Europe’s unique ecosystems and biodiversity. In reflection of the EU’s objective to cement its position as the leader in sustainable finance, there has been a push for the implementation of a holistic legislative package which aims to create fertile soil on which the high ideals of sustainability are intended to flourish. This legislative package is comprised of the Taxonomy Regulation, the Disclosure Regulation and the Benchmark Regulation (the Legislative Package).

Discussion and debate on the implications and legal effects of the Legislative Package will be covered in another article, however, it is important to first appreciate the nature and culture of sustainability as the underlying principle to the Legislative Package, and to understand the essence of sustainable finance before delving into the complexities of the Legislative Package.

Sustainability was first defined in the Brundtland report as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Our archaic dedication to the anthropocentric economic model (human centric approach) has not only inhibited the process of sustainability, but sadly allowed us to enter a point of ecological debt – in other words, we have chosen the pursuit of money to the detriment of our own, as well as our planet’s, well-being.

In order to counter this (unsustainable) approach, greater emphasis needs to be put on (a) standards of due diligence and transparency in the supply chain, (b) social and environmental considerations, and (c) responsible business conduct – and this irrespective of any mandatory or legal requirement. That said, in order to make this urgent shift towards a more sustainable (and fairer) economy, and thus move away from the short-term principle of profit maximisation, the introduction of legal mechanisms such the EU’s Legislative Package are required.

To this end, in an effort to promote sustainability, the European Commission came up with an Action Plan on Financing Sustainable Growth ( the Action Plan) which established three principle objectives which aim to create a harmonised juxtaposition amongst the principles of sustainability and finance – two concepts which were once considered paradoxical terms, but  are now projected to be symbiotic ideals which can (and should) thrive together.

The first principle objective is to reorient capital flows towards a sustainable economy. Private investment is the key to filling the current investment gap of circa €180 billion to reach the EU’s climate and energy goals and obligations under the United Nations Sustainable Development Goals and the Paris Agreement. The second objective is to promote the idea of sustainability in risk management, in other words to ensure that decision making is not only driven by financial considerations, but by other more sustainable and inclusive considerations (for example, supply chain transparency, and increased stakeholder engagement). The third (and final) objective is to foster transparency and long-termism which is essential for the achievement of a well-functioning financial system. Corporate transparency on sustainability issues is a prerequisite to enable financial market actors to properly assess the long-term value creation of companies and their management of sustainability risks. This because investments into environmental and social objectives require a long-term orientation based on effective and transparent considerations. Moreover, the European Commission is currently in the process of building on the 2018 Action Plan through a renewed sustainable finance strategy aimed at further supporting the actions set out in the European Green Deal.

Ultimately, sustainability in finance is the integration of environmental, social and governance (ESG) into one’s business practice and decision-making strategy for the purpose of transitioning to a low carbon circular economy. The systemic and explicit integration of ESG considerations will contribute greatly to the establishment of more resilient economy which throughout history has proven more and more necessary.

Irrespective of any government strategy or policy, the corporate transition towards a sustainable economy will not only contribute to the fight against climate change and social injustice, but will, in the long run, save costs through resource recovery, increase stakeholder (including shareholders and employees) engagement, increase resilience to shock of limited resources and disaster (including the Covid-19 pandemic), amelioration in reputation and marketability, open up to the fast growing green investment market, and ensure moral compliance by contributing to environmental and social objectives. Fortunately, there have been positive signs from the Malta Financial Services Authority as they are committed to increasing awareness on sustainable finance.

To this end, there is a need to not only understand the nature of sustainability in today’s financial context, but to implement it in our corporate behaviour. The application of sustainability is universal, and its long-term approach not only demands a legislative transition from soft international laws to hard mandatory obligations but a change in corporate culture and behaviour.


The author would like to thank Giannella Vella, student intern at Ganado Advocates, for her invaluable help in drafting this article.