10 years after the Paris agreement, Europe remains a global leader in sustainable investment
The forthcoming COP30 in Belėm in November will come at a crucial time for international climate initiatives. Although progress has been made in the ensuing 10 years since the Paris Agreement, the fight against global warming is far from over. Temperatures continue to rise, 2024 was the hottest year on record.
For years Europe has been a driving force in the battle against climate change. Thanks to its solid, long-term commitments, today it is an international hive of innovation and investment opportunity – and one which could hugely benefit given that globally annual clean energy investment needs to more than triple by 2030 to $4trn to reach net zero by 2050.
See more: PA Future coverage of COP30 so far
Europe’s commitment to net zero continues to accelerate
European government, corporate and investor commitments to sustainable investing and allocating capital to support the transition remain strong.
Russia’s invasion of Ukraine reshaped perceptions of energy security and forced the continent to speed up the energy transition. In 2023, European Union (EU) countries invested almost €110bn in renewable energy projects in 2023.
Europe is a huge investor in renewable energy, across wind, hydro and solar power. The EU spends 10 times more money investing in clean energy than it does in fossil fuels – all of which means it represents a truly vast hub of potential for investors.
This pace of investment is supported by the considerable foundations of the 2019 European Green Deal, which consists of over 175 directives – all of which aim to make Europe the first climate-neutral continent by 2050.
The initiative focuses on multiple areas, from boosting clean energy investment to climate technology innovation, to the oceans, agriculture, transport as well as finance and regional development through sustainable investments.
And while the environmental, social and governance (ESG) arena remains under scrutiny, Europe’s commitment to net zero continues to accelerate.
For example, to achieve the European Green Deal’s goals, the European Commission has pledged to mobilise at least €1trn in sustainable investments over the next decadev and in 2024, it announced it would invest a record €7bn into sustainable, safe and smart transport infrastructure.vi
Among many other targets, the EU has set a goal to ensure that by 2035 all new car and van sales will be zero-emission electric vehicles.vii And to boost the continent’s electric vehicle infrastructure the EU has brought in a law requiring fast-charging stations to be put in place every 60 kilometres along highways by the end of 2025.viii
We are witnessing an ever-rising number of European companies who are not only incorporating environmental commitments into their reporting but also into their business strategies. We see this reflected in industry standards such as the Science Based Targets initiative (SBTi), a global body that enables companies to set greenhouse gas reduction targets in line with climate science, aiming to limit global warming to 1.5°C above pre-industrial levels.
This process involves a structured five-step approach, including committing to targets, developing them, submitting for validation, and disclosing progress. Validation ensures that the targets are credible and measurable, helping companies demonstrate their commitment to sustainability and align with the goals of the Paris Agreement. Presently 65% of the MSCI Europe index, by market cap, has an SBTi-validated target versus 47% of S&P 500.
A flourishing investment landscape
The momentum has created myriad opportunities for investors – from carbon transition strategies that invest in companies on the path to net zero, to impact portfolios that invest in firms and projects offering specific solutions to risks such as climate change and biodiversity loss, e.g. renewable energy, water and waste management, or sustainable forestry.
Green bonds have become a mainstream fixed income asset class, financing projects like renewable energy, green buildings, and low carbon transport. They offer similar risk profiles to conventional bonds but with added transparency and impact reporting. The market has grown from €30bn in issuance a decade ago to €1.9trn in market value today. It has grown into a global universe, with breadth and depth in terms of sectors and issuers. Although 2025 issuance may be slightly lower than 2024’s record c.a. €420bn, innovation continues, notably with European Green Bonds gaining traction.
The broader green, social, and sustainability (GSS) bond market now rivals the euro investment-grade credit sector at €3tn in market value, with green bonds as its cornerstone. The state of the market should come as little surprise given that today, green bonds are entrenched in the mainstream – and have been for some time – typically offering a comparable yield to conventional bonds. Their consistent performance and transparency have made them essential tools for investors pursuing net zero goals.
Fundamentally, when it comes to sustainability initiatives and investment potential, Europe is leading the way.