As Europe drives forward its twin green and digital transitions, it faces a challenge of designing financial instruments that not only support innovation but support and model doing good in authentic and measurable ways.
The piloting of co-designed and impactful financial instruments for boosting innovation within the FI4INN project addresses this challenge, serving as a hands-on innovation lab: we are mindful of the fact that money is not neutral—and that financial instruments have the power to shape society. On top of insisting on multi-level stakeholder engagement and participatory design for its pilot projects, the FI4INN consortium explores a question of far-reaching impact: How to measure sustainability—of both financial instruments and their potential users—in a way that goes beyond compliance and into transformative territory?
ESG as a Foundation
Europe’s developing regulatory panorama—through instruments like the Corporate Sustainability Reporting Directive (CSRD), the EU taxonomy for sustainable activities and the European Sustainability Reporting Standards (ESRS)—has introduced the concept of double materiality, requiring companies to consider not only the impact of environmental and social issues on their business, but also their own impact on people and the planet.
While ESG (Environmental, Social, and Governance) metrics and the UN Sustainable Development Goals (SDGs) have become foundational frameworks in assessing non-financial performance, the current system is challenged by both real-world complexity and the resulting incomprehensiveness. We are past the point of treating symptoms and focusing on doing no harm. Just as double materiality does not go far enough, regulation alone does not guarantee transformation. Many ESG practices remain vague, inconsistent, or vulnerable to greenwashing, where claims of sustainability mask the status quo.
Triple Materiality as the Next Frontier
The emerging principle of triple materiality adds a critical dimension: systemic and ethical considerations rooted in locality and consistency. In practical terms, we do not promote fair labor practices by ensuring living wages at home and not overseas. We do not counteract deforestation by planting trees half the world away. Triple materiality considers internal financial materiality (what impacts economic activities), external impact materiality (what economic activities impact), and normative materiality (how economic activities align with societal values and ethical imperatives). It doesn’t just ask how environmental and social factors affect a company and vice versa—it evaluates whether a company’s purpose and practices contribute to the common good.
ECG as a Superstandard
The FI4INN consortium includes experts on ethical finance and the Economy for the Common Good (ECG)—a methodology and framework that directly complements ESG by evaluating a company’s, or a financial instrument’s, holistic impact and contribution to people and the planet through a value-based, transparent, actionable and certifiable system with the following key elements:
● The Common Good Matrix: evaluates a company’s performance across 20 themes like human dignity, solidarity, social justice, ecological sustainability, transparency, and democratic participation.
● External auditing and certification: reports are evaluated by independent auditors, leading to certifications that build trust and credibility.
● Organisational Development Tool: it isn’t just a scorecard—it guides companies toward improving their internal practices in a way that benefits all stakeholders, the planet among them.
True Sustainability as the Only Option
Europe’s regulatory momentum is commendable, but regulation alone cannot drive deep transformation towards a just and sustainable economy. Frameworks like ECG are essential complements that amplify the spirit behind ESG and SDG frameworks while making them actionable and resistant to greenwashing. Sustainability isn’t a compliance checkbox—it’s a design principle. For FI4INN partners piloting financial instruments, as well as for investors, policy-makers, and SMEs navigating this space, integrating triple materiality and adopting ECG principles offers not only regulatory compliance but also clarity and a pathway to purpose, accountability and authentic impact.
As the green economy matures, so must our metrics. From ESG to ECG, from double to triple materiality—the only truly sustainable path forward is one that ensures that the future of finance and innovation is not considered through the lens of growth, but through the lens of the common good.