“We need to start to talk about money in ways that dethrone it and make it subject to human ethics and standards of love and decency.”
― Joel Solomon
Sustainable finance is the process of considering environmental, social, and governance (ESG) factors when making financial investment decisions, leading to long investments in sustainable economic activities and projects. Climate change adaptive capacity, as well as the environment in general, such as biodiversity preservation, pollution avoidance, and the circular economy, are examples of environmental factors. ESG measures are now being used by an increasing number of significant institutional investors in their capital allocation and stewardship criteria. This shift toward sustainable finance, which includes asset management and ownership in addition to socially responsible investing, has far-reaching significance for both investors and businesses.
A sustainable financial centre as a whole is a financial centre that contributes to long-term economic, ecological and social development and value creation. In other words, one that ensures and increases economic efficiency, prosperity, and competitiveness today and in the long run, while also contributing to environmental protection and restoration, cultural diversity, and social well-being.
Sustainable funds, green bonds, impact investing, microfinance, active ownership, credits for sustainable projects, and the development of the entire financial system in a more sustainable fashion are just a few of the activities that come under the umbrella of sustainable finance.
There are a number of benchmarks that the investors may use to evaluate and distinguish between financial products labelled as sustainable:
- Eurosif Transparency Code
- Febelfin Quality Standard and Label
- FNG-Label for Sustainable Mutual Funds
- FNG Sustainability Profiles and Transparency Matrix
- ESG label
- Nordic Swan Ecolabel for Investment Funds
- Greenfin Label
- Label ISR
The growing importance of private sector companies in tackling climate change, diversity, and other vital societal concerns is driving these advances, with major investors pushing them in the right direction.
However, converting this investment strategy into measurable financial rewards for shareholders both in the short and long term, requires an understanding of the measures that businesses must take to increase the impact and sustainability of their business models.
