OBSERVER: How Copernicus helps implement sustainable finance and ensure sustainable growth

How is Copernicus helping the EU with its sustainable finance policy in the context of the EU Green Deal and the wider climate crisis?

Concretising the EU’s green ambitions via sustainable finance and ESG monitoring

The message from respected institutions around the globe is clear: the world must urgently and dramatically decrease greenhouse gas (GhG) emissions and protect natural ecosystems in order to limit the impact of climate change. In 2018, the United Nation’s Intergovernmental Panel on Climate Change (IPCC) published a Special Report describing in detail  the increase in extreme weather events, the sea level rise and the grave damage to ecosystems that an increase of 2 °C would entail. Acknowledging that climate change and environmental degradation pose an existential threat to Europe and the world, the European Commission announced its European Green Deal, a package of policies setting an ambitious roadmap towards a sustainable and climate-resilient society.  The EU is thus embarking on a green transformation, whereby it is pivoting towards a more sustainable way of living and away from environmentally harmful practices.

Sustainable finance is essential to delivering on the EU Green Deal by aligning financial markets with sustainable development goals, providing long-term and stable funding, encouraging private sector investment, enhancing transparency and accountability, and facilitating innovation. As a tool, it refers to the process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector. While environmental factors include climate change mitigation and adaptation, biodiversity, natural resources, energy performance, air and water quality, social factors incorporate issues of inequality, inclusiveness, labour relations, investment in human capital and communities, as well as human rights. Governance considerations include management structures, employee relations and executive remuneration. Being able to measure how public and private entities take into account all of these elements—many of which are engrained in EU law and regulations— incentivises more sustainable practices. Because sustainable finance targets every economic sector of society, it wields the power to enact structural change by influencing the behaviour of economic actors across the board.

What the green transition means for businesses

As the motor of economic life, the actions of businesses and organisations have the potential to affect change on the macro scale. Already, companies are feeling the pressure to pursue sustainability targets as a key element of their value proposition. Furthermore, the evolving policy landscape is increasing pressure on businesses to rectify their mode of operation to follow one that is more sustainable. For example, the EU’s sustainable finance taxonomy regulation which comes under the broader EU action plan on sustainable finance makes it mandatory for regulators to quantify ESG calculations when classifying which sections of the economy can be marketed as “sustainable investments”. The legislation defines economic activities as environmentally sustainable if they contribute substantially to one or more of the following environmental objectives: climate mitigation/adaptation, pollution prevention and control, the sustainable use and protection of water and marine resources and the protection and restoration of biodiversity and ecosystems. Such a practice also helps investors evaluate companies and consumers assess the impact there are having on the planet when consuming a product or service. Nevertheless, in order for the system to be efficient, data needs to be gathered to substantiate green claims.

Currently, the collection of ESG data is reliant on in-situ sensors deployed by the companies that then self-report the data. This system has inevitably led to numerous scandals where large corporations have been outed for “greenwashing” otherwise known as false claims of environmental sustainability. Earth Observation (EO) offers an alternative solution to this problem. Copernicus in particular is able to deliver the needed insights thanks to the data it collects in an open, unbiased, consistent, verifiable and granular way. Moreover, the quality and comprehensiveness of Copernicus data makes it ideal for any entity anywhere in the world to use.

How Copernicus helps monitor ESG metrics

Climate mitigation: monitoring greenhouse gases

The Copernicus Atmosphere Monitoring Service (CAMS) monitors the concentration of GhG such as carbon dioxide and methane in the atmosphere with high accuracy and detail. This data is then used by businesses as an input to improve their existing services, ensure resilience of their supply chains and deliver on their CSR targets (i.e., reducing their carbon footprint)—something the European Commission inscribed in the European Climate Law. Several companies are already exploiting Copernicus data, and in particular information collected by Sentinel-5P to provide unbiased environmental performance indicators such as the concentration of nitrogen oxide and particulates in the interested areas. Launched in 2017, the Sentinel-5 Precursor relies on its TROPOMI payload to monitor several pollutants and greenhouse gases in the atmosphere, such as ozone (O3) and methane (CH4), as well as carbon, sulphur, and nitrogen oxides (COX, SOX, NOX).

The contribution of Copernicus is set to increase significantly in the coming years thanks to the upcoming launches of new satellites. Sentinel-4 and Sentinel-5 are the first ones and are planned to work in tandem to complement and expand upon the capabilities provided by Sentinel-5P. Additionally, further data will be provided by the Copernicus Expansion Missions, namely the CO2M constellation, which will focus on anthropogenic emissions of CO2.

Data provided by Copernicus can also help with climate mitigation on the renewable energy front. Copernicus data actively supports applications such as solar and wind energy production forecasting, renewable energy site selection, biomass monitoring or water level monitoring.

Protecting and restoring ecosystems: monitoring biodiversity and forestry

Beyond the carbon footprint, biodiversity and forestry is rising in the rank of investors’ ESG considerations. Biodiversity and natural capital are essential to the continuation of the production of the goods the world depends on. In this regard, the Copernicus Climate Change Service (C3S) works together with businesses across the globe to turn raw climate data into sector-specific information which can be used by companies that are working to preserve species, to protect the areas that are most climate sensitive, to increase the resilience of ecosystems, to reduce biodiversity loss. Stakeholders’ interest is certainly inspired by the European Commission’s prioritisation of such matters as highlighted in its publications on the EU’s Biodiversity Strategy for 2030 and new EU Forest Strategy for 2030.

Sustainable use of resources: monitoring marine resources

The growth of the blue economy will inevitably continue to put stress on ocean resources. In order to ensure the sustainable use of our oceans, there is a need for better management. The Copernicus Marine Service provides products which help industry sustainably manage living marine resources, including fisheries and aquaculture. Copernicus marine data supports the monitoring, forecasting and assessment of commercial activities which companies in the fishing industry can use to ensure a sustainable yield and rebuild overexploited stocks. This is of particular importance to companies claiming that their seafood is sustainably sourced.

Leading the way to a sustainable future

The transition envisaged under the Green Deal demands active and dedicated engagement from citizens, industry and government. In this respect, the European Union has adopted a sustainable finance outlook which have been underpinned by regulations that fortify the merit of ESG considerations and lead to more long-term investments in sustainable economic activities for a healthier planet. However, quantifying and meeting ESG targets cannot be realised without a system to reliably monitor them. Thanks to its unbiased, consistent and quality data, Copernicus is helping companies deliver on their ESG goals and the EU implement its sustainable finance policy in the context of the EU Green Deal.