Already at its second edition, Climate Change Summit is one of the most important events in the Eastern-European region for innovators, entrepreneurs, researchers and more, where they can meet and discuss the world's most pressing climate issues and how we can overcome them.

Raphael Minder, Central Europe Correspondent, The Financial Times, had a chat about how sustainable financing could help humanity in its fight against climate change with David Carlin, Head of Climate Risk, UN Environment Program Finance Initiative.

The importance of regulation

David believes that, just as with greenwashing, which can prove to be a dangerous enemy to real climate action, sustainable financing could benefit a lot from regulations.

"We always have to remember this oppositional relationship between the analyst and the evaluated company in the sense that the company really wants to look the best it can and without any parameters on what they can or cannot say. Then you start to run into an issue where there's very little information value out there", he explained.

He also believes that interoperability is key here and what officials around the world need to establish is a set of obligations that won't go into conflict with regional-based legislation.

"If you're going to meet one commitment, then another jurisdiction won't have a conflicting commitment, but might have that one plus something else", that being the good news in his view.

The challenge he sees is in how the regulations will be based. Should they be based on more universal principles, they will be easier to implement and follow, without risking noncompliance. However, as soon as local jurisdictions will look more into the legalistic and individual line of a specific article might spark confusion within companies and lawmakers.

More rules lead to a shrinking industry?

The next issue we might think of is that tighter regulation could potentially reduce the number of companies in the sustainable industry, as the financing will be harder to reach. David once more believes that it's not going to be the case and instead, it might increase competitivity.

"I don't think demand will be dampened at all and this is why people have created these funds to begin with. Why is it desirable to have a sustainable fund? Well, because there is a large group of individuals in the marketplace who want to see their money go towards constructive purposes."

"I do see demand continue to rise, I do see the market-driven transition also rise and so short-term you will see smaller absolute numbers, but I think it's not going to actually dampen the growth or the access to capital", the Head of Climate Risk at UN's Environment Program Finance Initiative added.

The European Union also considers sustainable financing an important part of its long-term strategy for the future, as it will allow the member countries to reduce their negative impact on the environment and contribute to a more durable future.

Thus, they say that "the European Union strongly supports the transition to a low-carbon, more resource-efficient and sustainable economy and has been at the forefront of efforts to build a financial system that supports sustainable growth."

As an example, David believes that the Carbon Border Adjustment Mechanism (CBAM) will be an effective solution to force industry members in the EU become more sustainable.

"I think it will motivate trade partners, as well. It is sort of a best next-thing to a carbon price in terms of changing that dynamic", he explains.

Renewable energy is one of the pillars to sustainable development

In the end, sustainable development will be driven mostly by a mixture of regulations and informing people correctly about what needs to be done in this direction and why.

Sustainable development can't be a one-size fits all approach, David Carlin explains and exemptions won't solve the biggest issue when it comes to countries and regions who previously relied heavily on fossil-generated power, for example, as is the case for Poland and Germany. Instead, David's proposition suggests that there needs to be active support for a country or regions' transition, such as the transition from fossil fuels.

Also, when it comes to the energy transition, he argues that the world's focus generally must be on developing the proper green infrastructure that can support the added number of renewables, especially in emerging countries.