Green Finance for Sustainable Growth, the Case of Croatia

Abstract

Sustainable investments make a growing and important share of total assets under management in the fund management industry. Except for investor preferences, a significant driver of demand for sustainable assets will also be the new European plan for sustainable finance. The goal of the plan is to reorient capital towards a more sustainable economy by incentivizing financial intermediaries to offer more sustainable investment products. This paper aims to assess the EU plan for sustainable finance and explain its implications on the financial system and the economy of a small member state, using Croatia as an example. In addition to that, we also present policy advice for policymakers that want to use the European plan for sustainable finance to make their economy (more) sustainable. We find that although the plan is broad and ambitious, to ensure its overall success some additions and tweaks at the national level could be needed. First, including pension plans as one of the biggest investors in many EU member states would increase overall plan impact. Second, national-level regulation about non-financial (sustainability) data for listed companies might be beneficial. Without such regulation, obtaining data directly from corporations might result in non-comparable reports or missing data. In the second step, this could undermine the plan's overall goals.