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Your Guide to Sustainable Finance
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Looking for the ultimate guide to sustainable finance?
We’ve comprised a comprehensive guide to sustainable finance so that you can better manage your business and investments all while helping the environment.
The truth is, investors aren’t able to prioritise profit the way they used to – finances and investments must coincide with climate change, and seek to support both financial and environmental.
This is where sustainable finance comes into play.
What is sustainable finance?
Sustainable finance is an investment method that strives to include environmental and ethical business standards.
Sustainable finance considers the environmental, social, and governance, otherwise known as ESG factors – of a business, organization, or project.
“ A center for sustainable finance is a market that aims to satisfy the requirements for sustainable development while still supporting economic growth. Sustainable finance seeks to increase economic efficiency and prosperity in the present moment, but also for future endeavors. ”
Practicing sustainable finance also provides the opportunity to preserve and improve ecological systems and the social health of society.
A few examples of sustainable finance include sustainable funds, impact investing, microfinance, active ownership, green bonds, credits for sustainable projects and re-developing a financial system in its entirety with a newfound mindset of sustainability.
Sustainable finance accomplishes this by re-allocating a business money for long-term financial, social, and environmental success, by diversifying or shifting the investments to avoid financial loss, and by monitoring the potential impact on external factors – such as stakeholders or the environment.
How does sustainable finance support ESG values?
ESG often refers to an ESG score, ESG or ESG reporting.
The ‘E’, ‘S’, ‘G’ in ESG stands for, “Environmental, Social, and Governance” – which are the three crucial components that companies use to measure the preventative environmental and sustainability measures their business takes.
An ESG is a calculation of a company’s environmental, social, and governance tactics that are developed and maintained within their own business model. Companies often strive to share their ESG data as a way to establish transparency, trust, and accountability in their environmental goals in order to persuade investors, employees and customers to contribute, join, or support their business.
How does Sustainable Finance help the environment?
Sustainable finance helps the environment through the use of responsible investing and financial projects that use sustainable resources to reduce the further risk of climate change.
How does Sustainable Finance help social factors?
Sustainable finance helps social factors by increasing trust and transparency between companies, investors, and customers – and also by providing a more conducive work environment for a company’s employees.
Sustainable finance also contributes to consumer protection, animal welfare, and a non-discriminatory hiring process.
How does Sustainable Finance help governance?
Sustainable finance helps to encourage better environmental organizational habits within governmental sectors and promote more eco-friendly investments and financial distribution habits.
How does sustainable finance relate to CSR?
How does sustainable finance contribute to corporate social responsibility?
What is corporate social responsibility?
Corporate social responsibility is a method of managing a company in order to implement social and environmental factors into their business plans and make their intentions clear to their stakeholders.
“ Corporate social responsibility, otherwise known as CSR – is a pathway to achieve economic, social, and environmental balance. ”
Sustainable finance relates to corporate social responsibility as potential investors are most likely to offer their money to companies that demonstrate corporate social responsibility.
👉 Think of it this way – who are you more likely to choose as a babysitter for your three-year-old toddler on a Saturday night?
A 21-year-old student who has a driver’s license, has good references, and is reliable – or the 17-year-old daughter of your friend who is known for causing trouble from time to time?
Obviously, you’re bound to choose the 21-year-old college student with a driver’s license. They are clearly responsible, and are able to transport themselves to and from their side-gig on Saturday night – whereas choosing the 17-year-old to babysit comes with other potential complications.
The same goes for investors – they will be simultaneously intrigued and assured if they invest in a company that delineates a strong level of corporate social responsibility, which will in turn directly benefit their future in sustainable finance.
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What are the benefits of sustainable finance?
There are a multitude of benefits when it comes to sustainable finance. But what do ESG-friendly investments do better than conventional investments?
For starters, we are living in an evolving eco-friendly society. In other words, it’s becoming increasingly trendy to subscribe to notions of sustainability – such as avoiding fast fashion, eating plant-based, or using a shared bike service to get to work.
“ Given the growing popularity of sustainability and environmentally friendly products on the market, subscribing to sustainable finance will allow businesses to grow by increasing their revenue through product sales, services, newfound interest by future investors, and new customers seeking smarter, greener consumerism. ”
For instance, sustainable finance allows companies to offer direct sustainable support for the planet and make the environment a more just, functional, and inclusive place to live. Also, sustainable finance are likely to yield similar results to other investments – which makes any business committed to sustainable finance a more attractive and prosperous business to invest in.
Sustainable finance is also good for businesses as it allows them more opportunities for partnerships. As shallow as many influencers on Instagram may seem with their sponsorships – studies show that two-thirds of customers would prefer to buy products or services from a company that shares their values.
👉 Think about it this way: it doesn’t harm a business committing to environmentally friendly habits such as sustainable finance if the customer isn’t interested – but it holds the interest of a customer who is interested in these sustainable business practices.
Therefore, a company demonstrating sustainable finance is more likely to appeal to a wider audience of future customers, employees and investors.
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Remember, in the age of digital media – word of mouth isn’t just through the grapevine at lunch, anymore. If someone likes a product or service by a company, that influence can spread like wildfire in the best way.
In fact, a customer is around five times more likely to buy something from a brand that depicts their corporate morals or sustainability, and on the flip side – 75% of customers are likely to stop purchasing the product if a particular company value doesn’t align in their personal lives, and convince others to do the same.
In short, a business practice like sustainable finance can boost business just as easily as it can make it plummet.
Also, traditional industries that are notorious for contributing to high rates of greenhouse gas emissions such as coal, oil, and gas – and finding it increasingly difficult to find investors willing to associate themselves with their environmentally, unethical industrialization.
“ The good thing is, as more companies begin to grow aware of environmentally friendly practices like sustainable finance – more and more unsustainable companies will no longer be able to maintain their business without customers, investors, or employees. ”
Because of this, sustainable companies are more likely to sign with new partners and reduce their expenditures as they are more likely to implement industrialization habits that produce less greenhouse gas emissions.
Lastly, companies that practice sustainable finance will save money and potential resources or business opportunities that demand higher funding as they’re more likely to keep their employees happy and a part of their project.
👉 It’s the same concept as the potential to keep all customers happy even if the concept of eco-friendly financial habits doesn’t intrigue all customers. A company is more likely to keep all their employees happy by practicing sustainable finance than they are to if they only invest or seek revenue or success through financial means.
Why is sustainable finance not as popular as it could be?
So, why don’t more companies commit to sustainable finance practices when they could?
As sustainable finance’s primary goal isn’t financial gain – company’s often overlook the environmental importance of sustainable investing, and prioritise monetary aspects of their business before all else.
That being said, there are still a reasonable number of potential negative consequences to sustainable finance.
For instance, given the relatively new concept of sustainability in finances – an investor may be apprehensive to fully commit to another business as there are no clear, previous standards to compare to calculate the company’s success in sustainable finance. Also, because sustainable finance seeks to serve environmental and governance sectors rather than solely the economic pillars, loans may be more difficult to come by, as the company may not be achieving the capital levels necessary to be granted such loans.
Why is it important to commit to sustainable finance?
So, is sustainable finance still worth a try?
Despite these potential deterrents of sustainable finance, it’s still important to give sustainable finance a try – because the benefits are ultimately more lucrative than the possible, small roadblocks.
“ Sustainable finance was born as a result of a society that is determined to find corrective action for the many things that have grown corrupt across the globe – such as social, racial, and gender gaps. ”
Also, cultivating a consistent, profitable revenue isn’t possible without keeping the environment in mind – because every existing business depends on natural resources in our ecosystems to thrive and find financial success.
👉 Think about it: your favorite clothing brand, kombucha, or even lipstick is created through the use of some compulsory, natural element.
If we continue to destroy our planet at the rate we are, no business will have any natural resources left to work with.
As the global effort to fight climate change continues to grow as a collective, unified effort – sustainable finance can serve as yet another revelation that can help us create simple financial and investment habits to decrease our carbon footprint on a daily basis.
Money is a part of life, and the ultimate resource for everything – therefore, practicing sustainability through finances is one of the easiest ways to teach us about sustainability in all other aspects of our lives.
How can you get started in sustainable finance?
So, how can you get started in sustainable finance?
The first step to success in sustainable finance is to get familiar with the quantitative and qualitative data from your company’s ESG score.
Once you and your company can understand your ESG Data, it will be easier to determine which areas need the most improvement – and then goals can be implemented to increase efficiency in those areas, which will ultimately make your business a more financially attractive investment.
After establishing your best efforts to analyze and enhance your ESG score, your company can then look into governmental funds or investors that seek sustainable change, which will continue to improve your environmental, economic, and social sectors.
Overall, sustainable finance isn’t as menacing or difficult to achieve as one might think – small steps can be taken to slowly develop your plan for sustainable finance.
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What About Greenly?
If reading this article about sustainable finance has made you interested in reducing your carbon emission to further fight against climate change – Greenly can help you!
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
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