Environmental, social and governance (ESG) is impacting more and more investment decisions. With its strengthened importance across the entire financial ecosystem, investors no longer need to struggle between profits and protecting the planet.
What is Green or Sustainable Finance?
Sustainable finance prioritizes sustainable organizations that help the environment and focus on inclusion and ethical business practices. It covers many activities, from funding green energy initiatives to investing in businesses with strong social values, such as inclusion, good governance or including more women at board level.
Apart from eco investments and green projects, its coverage is much broader that one could expect. According to the European Union (EU), sustainable finance is vital to the world’s transition to net zero since it channels private money into carbon-neutral projects. Sustainable organizations offer higher returns for investors with evidence, as organizations with high ESG ratings tend to enjoy greater share price increases.
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What Are Stakeholders' Play in Sustainable Market?
Consumers are 4 to 6 times more likely to buy from a brand with a corporate purpose they support. However, if an organization does something they disagree with, 75% claim they will stop buying from that brand and encourage others to do the same.
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Can ‘Green’ Product Claims Be Trusted?
According to McKinsey, sustainable organizations are more likely to:
- Win contracts
- Reduce costs by using fewer resources
- Face less regulation
- Retain staff
- Avoid losing money on carbon-intensive processes
In fact, Reuters reported that global organizations took in US$859 billion in sustainable investments in 2021, including US$481.8 billion in green bonds that raised money for specific environmental initiatives. Bloomberg predicts that the total value of ESG investments could exceed US$53 trillion by 2025, more than a third of all global investments.
Common Green Finance Instruments
Seeing more sustainability/ ESG discussions at board level, companies are increasingly utilizing the following green initiatives to implement their sustainability strategies:
Sustainable Lending
Like sustainable investing, sustainability-linked loan will usually focus on giving the borrower incentives to meet ESG performance targets.
Green Bonds
These are debt securities designed to finance environmentally friendly projects.
Global Standard for Sustainable Finance: ISO 32210
All financial sector organizations, including direct lenders and investors, asset managers and service providers, can refer to the ISO 32210 framework on addressing what is material from the organization and its stakeholders’ perspectives. It includes guidance on how key sustainable finance principles can be integrated at the organizational level, into operations and core business strategy.
It provides common terminology and principles that financial sector organizations can use to become more sustainable and align with international initiatives, including the UN Sustainable Development Goals (SDGs) and the Paris Agreement.
Benefits of ISO 32210 Framework
ISO 32210 can enable you to:
- Integrate Sustainability into your activities efficiently and consistently
- Drive value, continuous improvement, risk mitigation and sustainable growth
- Increase trust in your operations
- Enhance sustainability understanding and collaboration
- Use the standard, whatever your expertise and capacity levels
- Demonstrate your alignment with numerous environmental and social goals
- Contribute to UN Sustainable Development Goals 1-16
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This article is originally published by SGS:
SGS is the world’s leading testing, inspection and certification company. We are recognized as the global benchmark for sustainability, quality and integrity.
