Challenges and opportunities to scale up sustainable finance after the COVID-19 crisis: Lessons and promising innovations from science and practice

Transitioning to a sustainable future with inclusive, green economies and resilient ecosystems requires huge investments. The rescue packages imposed by the COVID-19 crisis make the pursuit of global sustainability goals even more dependent on urgent investment decisions to be taken by the public and private sector. This article examines some of the basic conditions for scaling up sustainable finance, focussing in particular on decision-support tools (DSTs) that guide investment decisions, such as metrics, rankings, ratings and standards. It identifies key DST strengths and weaknesses via a literature review of 100 publications containing expert opinions of sustainable finance scientists and professionals. This is complemented by a comparative analysis of three DSTs that represent the state of the art in their respective typologies: RobecoSAM’s Country Sustainability Rankings, IFC Performance Standards, and ETH’s Impact ÆSSURANCE Sovereign Ratings. The analysis reveals that: (i) experts express a strong, persistent criticism of current sustainability assessment practice, (ii) three main weaknesses characterize most DSTs: credibility deficit, narrow focus, and time-horizon limitations, and (iii) by using an integrated impact assessment framework, superior forecasting capacity and distributed verification techniques assisted by artificial intelligence, the Impact ÆSSURANCE rating model is a promising solution to scale up sustainable finance.