Measuring investments progress in ecological transition: The Green Investment Financial Tool (GIFT) approach

Driving and monitoring the transition toward a sustainable economy requires sound environmental and social indicators. In this paper we outline the ‘Green Investment Financial Tool’ (GIFT), an approach developed within a pilot project of the Italian government to assess the environmental performance of investments through quantitative indicators defined based on system thinking and life cycle assessment, while pursuing the fulfilment of the “Do Not Significant Harm” principle (i.e., no step back in the six environmental objectives set in the EU taxonomy for sustainable activities) as well as social safeguard requirements. We explain how the GIFT can be applied to small and medium business investments without creating competitive barriers associated with high cost of implementation. We also discuss how the approach could be potentially used in support of policy applications (e.g., enhancing green private investments, issuing green government bonds), when defining improvement objectives aligned with the EU taxonomy, and its implications for knowledge creation (monitoring and accounting). Finally, research orientations for potential future developments of the approach are addressed.