Executive Summary
This summary provides a comprehensive overview of the key findings and insights presented in the report. The chapters that included in the report explore critical topics in sustainable development, including the EU’s opportunity to redefine global sustainable development challenges, the interconnectedness of natural capital and cultural heritage, the potential of green jobs and digital transition, carbon farming and voluntary carbon markets in the EU, private sector funding of the SDGs, and the identification of SDG content in financial asset portfolios.
Each chapter highlights significant considerations and offers policy recommendations for driving sustainable development and achieving the SDGs. Below the key points of each chapter is sumarized:
- Interdependence, Networks, and Green Deal: The EU’s Opportunity to Redefine the Landscape of Global Sustainable Development Challenges
This chapter discusses the importance of adopting a region-specific and nuanced approach to drive sustainable development in the European Union (EU) and globally in alignment with the Sustainable Development Goals (SDGs). It emphasizes the significance of understanding interconnected systems and the use of strategic tools like weaponized interdependence for achieving geostrategic objectives.
The EU Green Deal is highlighted as a key part of addressing externalities like deforestation and work-related accidents. The importance of formulating effective policies and enhancing international cooperation is underlined. The idea of leveraging interconnected networks for designing international sustainable policies is also discussed.
Furthermore, the document presents a figure from a study in progress on representation of SDG spillovers in a new conceptual framework. The figure is used to demonstrate the role of the EU, Western Europe, Southeast Asia, and East Asia in mitigating the social implications of work-related fatalities through targeted trade measures.
The chapter concludes that a holistic approach to interlinked challenges, global cooperation, tailored legislation, and understanding specific challenges can lead the international community towards a more sustainable and equitable future.
- Private Sector Funding of the SDGs
This chapter discusses private sector funding of the Sustainable Development Goals (SDGs). It highlights the increasing engagement from the finance industry in funding SDGs and the diversification of their commitments across different goals.
However, the chapter also points out that private sector engagement on the SDGs remains small compared to the total capital required for achieving the goals. It mentions the increasing alignment of finance industry leaders’ SDG financing with critical SDG funding gaps. Despite this progress, several challenges remain in unlocking further private sector commitments:
Competing demands on global capital: Political and economic events, such as Russia’s invasion of Ukraine, have shifted priorities away from sustainability to energy security, food security, and military spending.
Macro-headwinds repricing assets: The combination of rising interest rates, high inflation, and a global energy crisis has caused changes in global asset prices, affecting sustainable investments.
A lack of standards for measurement and reporting: Confusion regarding ESG performance measurement and incorporation into investment decision-making remains an obstacle in the industry.
Increasing awareness of greenwashing: Questions about the authenticity of ESG commitments and the prevalence of greenwashing raise concerns.
Political backlash against ESG and sustainable investing: Some regions and political groups have shown hostility toward ESG investments, hindering progress in sustainability.
Legal risk related to fiduciary duties: Some institutions are concerned about potential legal risks arising from their involvement in sustainable investing frameworks.
- ESG Momentum in International equity returns and the SDG content of financial asset portfolios
This chapter discusses Environmental, Social, and Governance (ESG) momentum in international equity returns and relates this to the Sustainable Development Goals (SDGs) context, particularly in the creation of financial asset portfolios.
It provides numerical evidence on the application of ESG metrics in calculating portfolio returns. It examines a methodological approach in integrating SDGs into ESG framework, highlighting a shift in investment evaluation towards considering the SDGs, and the associated urgency of capital mobilization towards these goals.
After presenting in brief, the existing work connecting the SDGs with European Green Deal policy documents, and with sustainability reporting of companies, the section goes on by explaining the process of mapping ESG categories to SDGs, using a mathematical approach to calculate raw and normalized weights for SDG indicators and their individual KPIs. These weights are utilized in the formulation of SDG scores and factor mimicking portfolios, which reflect risks related to specific SDGs.
Furthermore, a calculation of the SDG footprint of a portfolio using an extended version of the Fama and French 3-factor model, drawing a link between asset sensitivity and portfolio weights, is also explored.
The chapter concludes by emphasizing the significant returns associated with firms performing well in terms of ESGs. It acknowledges the existence of strong ESG momentum in international markets, particularly for big stocks showing improved performance over the last two years. These findings reveal the significant role of SDGs in shaping and determining the value and effectiveness of financial asset pricing.
- The Interconnectedness of Natural Capital, Social Capital, Produced Capital, and Cultural Heritage in Sustainable Development
This chapter discusses the interconnectedness of natural capital, social capital, produced capital, and cultural heritage in sustainable development. It presents correlation matrices to show relationships among various factors such as aesthetic, authenticity, historical, social, and spiritual values, as well as tangible and intangible cultural heritage. The study aims to understand the impact of these factors on peoples’ willingness to pay (WTP) for cultural values.
The data is divided into two categories - European and non-European countries, which are then analyzed with simple and full specifications, considering tangible and intangible cultural heritage distinctions. The analysis aims to understand the effect of demographics such as gender, income, education, and age on peoples’ WTP for cultural values, as well as the impact of the various cultural values themselves.
Through a meta-regression analysis, the chapter concludes that tangible cultural heritage significantly affects European specifications, while intangible cultural heritage affects both European and non-European specifications in a statistically significant way. Aesthetic and spiritual values seem to primarily affect European countries’ specifications.
Based on this analysis, it is apparent that cultural and demographic factors have a substantial impact on sustainable development and the perception of cultural heritage. Such information can guide policymakers to make more informed decisions when designing plans to promote the preservation and appreciation of cultural heritage in their respective regions.
- Carbon farming and voluntary carbon markets in the EU
This chapter provides a comprehensive overview of carbon farming and voluntary carbon markets (VCMs) in the European Union. It discusses the key market, emissions, and policy developments that are shaping the field, as well as the challenges and potential of VCMs.
It also offers a synthesis of policy recommendations to address these challenges. Below some of the key points covered in this chapter:
Local actors should be at the forefront of VCM projects, due to their knowledge, rights, and role in maintaining the project.
Actors, particularly small and family farms, should receive ongoing guidance and support through administrative and financial incentives.
Collaboration must involve safeguards for farmers, communities, and ecosystems, based on scientific expertise, transparency, and land right laws.
VCM efforts should focus on nature-based solutions, integrating social, biodiversity, and resilience through ecosystem restoration.
A harmonized policy and ecological system are necessary to integrate obligations, accounting, and social and environmental objectives.
Ethical, independent, and transparent governance at all levels is crucial for a just implementation of VCMs.
Voluntary carbon markets should supplement dominant funding and work toward becoming obsolete as emissions reductions increase.
Finally, the chapter also discusses the involvement of the financial sector in climate finance and carbon credit derivatives markets, as well as the development of regulatory mechanisms following negotiations.
- From Skills to Sustainability: The Potential of Green Jobs and Digital Transition
This chapter focuses on green jobs and sustainability within the energy sector, discussing various aspects such as employment trends, skills required, and future prospects. It is separated in two parts: one on tracking energy employment to ensure good quality jobs in the net zero and another on Enhancing the Digital and Green Transitions.
The first part describes the main findings of the World Energy Employment report, published in September 2022 by the International Energy Agency (IEA) with the support and analytical contribution of Enel Foundation. This section provides statistical data and insights on jobs into different segments of the energy industry. First, it highlights the distribution of energy sector employees in the various clusters of the energy value chain (e.g., manufacturing, construction, utilities, and others), with respective percentages provided for geography. Second, it breaks down the employment figures in the power generation sector, showing that renewable energy sources have significant employment opportunities, particularly in solar PV and wind power. Third, it emphasizes a higher percentage of high-skilled workers in the energy sector compared to other industries. Companies are increasingly looking for workers with specific skills for the clean energy sector, and this also means identifying those skill sets that can be transitioned from traditional to clean energy sectors. Next, it suggests three policy recommendations to meeting the demand for skilled labor—developing energy transition-ready vocational and educational programs through strong partnerships between academia (secondary schools and universities) and energy industries, well-crafted training programs, and involving the unions for proper collective bargaining arrangements and labor transition plans. Last, it gives projections about the energy employment in 2030, based on the IEA’s World Energy Outlook 2022 scenarios, which show an increase in energy employment, with renewable energy sources such as solar PV and wind power driving job growth in the power sector.
The second part provides policymakers with valuable insights into the critical aspects of the digital and green transitions and helps them understand better the skills landscape in the green economy. This understanding is essential for developing targeted retraining and reskilling policies that ensure a just transition for communities affected by the shift to low-carbon industries.
Also, the critical role of National Observatories for the Digital Transition is highlighted. These, can be powerful tools for polycimakers to analyze the complexities of digitization, addressing structural deficiencies, and fostering inclusive and sustainable digital transformations. By leveraging the insights provided by these observatories, policymakers can make informed decisions to bridge the digital gaps, enhance connectivity, and drive economic growth in the digital age.
Climate responsibility, eco-anxiety, and perception about governments
This chapter is about climate responsibility, eco-anxiety, and perceptions about government actions towards climate change. Game theory and particularly the prisoner’s dilemma and coordination game aspects are used to model ecological interactions, and to study how this affect individual responsibility towards the environment.
The primary focus is to examine whether eco-anxiety and confidence in other governments’ efforts to address climate change have an impact on personal responsibility towards climate change. The results show that both eco-anxiety and perception about government efforts positively impact personal environmental responsibility. Interestingly, this contradicts the theoretical free-riding hypothesis expected from game theory models of ecological action.
It is highlighted that both increasing government efforts and better communication about climate change can encourage people to take more responsibility for eco-friendly actions. Additionally, improved awareness and communication about climate change risks, lead to more responsible everyday actions towards the environment.