Sustainable Finance: From hype to reality

According to a survey by ING Germany, F.A.Z. BUSINESS MEDIA I research and FINANCE Magazine, sustainable finance remains a strategically relevant topic despite geopolitical uncertainties. This is confirmed by 72 percent of the financial decision-makers surveyed in companies. In the online survey, in addition to financial decision-makers, executives and sustainability managers indicated how relevant ESG factors (environmental, social and governance) and sustainable financing solutions are for their companies.

Despite headwinds, a broad base of business is behind the sustainable transformation of the economy and its companies. However, there are obstacles: For example, geopolitical and economic uncertainties have delayed the sustainable transformation of many companies in the past twelve months, according to 31 percent executives and sustainability officers, according to the survey. This was at least partially the case for another 32 percent.

Sustainable transformation as a growth driver

However, the study also shows that ESG issues are not becoming more significant compared to the previous year, but remain at a constant level. The demand for sustainable financing solutions in Germany has also stagnated in recent years. Eddy Henning, Head of Wholesale Banking ING Germany, sees this as a mature market: "We have reached a plateau of productivity after the marketing-driven hype of the early years has subsided. Companies today approach the topic much more soberly and strategically."

According to the results of the study, the majority of companies are also convinced that sustainability is compatible with economic growth. More than 60 percent of those surveyed said that sustainable transformation is an important growth driver for Germany. ESG will also pay off as a long-term competitive advantage, according to a majority of questioned executives.

This year, the global market for sustainable finance is expected to grow again after declining somewhat last year. This is shown by ING's quarterly Sustainable Finance Pulse, which provides a market overview. The market is booming, especially in Central and Eastern Europe.

Regulations slow down the sustainable transformation

However, many entrepreneurs criticize that regulatory requirements prevent them from the sustainable transformation - time-consuming documentation obligations and frequent changes stand in the way. That is why nine out of ten executives surveyed are calling for clearer and more stable framework conditions. 71 percent feel that sustainability reporting is too bureaucratic.

According to a majority of financial decision-makers, strong ESG performance has not yet led to measurable cost advantages in their own financing conditions. Perhaps this is one of the reasons why almost three-quarters of financial decision-makers find that the costs and benefits are not proportionate.

Finance as an "enabler" of the green transformation

The financial sector plays a decisive role in the sustainable transformation. 67 percent of executives see it as an enabler, and the majority of financial decision-makers see the capital market as an important source of financing. When it comes to sustainability, financiers want transparency and sustainability from companies. For example, 57 percent of financial decision-makers report that banks and investors want regular and reliable ESG reporting. However, the number of executives is significantly lower. 43 percent of them do not perceive any specific requirements for transparency or credibility. But companies also expect support and do not want to be left alone in the transformation. 61 percent of financial decision-makers expect banks to advise them on sustainable financing.

This is also confirmed by Eddy Henning: "In the past, we talked almost exclusively about the product: How does it work, what are the technical features? Today, we support customers much more closely in their transformation and use financial products where they bring a real advantage. We are sparring partners and bring regulatory know-how, market knowledge and best practices from other companies."

Trends and outlook

What is certain is that ESG has great potential: a good half of the financial decision-makers expect that in the future it will help determine the creditworthiness assessment of how companies deal with environmental and transformation risks. But a credible ESG strategy is also crucial for attracting young talent, according to 40 percent of companies. Many executives are convinced that the topic of sustainability will become more important in the next five years.

Find out more about our Green Finance study Opens in a new tabhere.