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Understanding the Impact of Sustainable Finance on Climate Change.

The effects of Global warming continue to ravage across the planet. According to the provisional WMO State of the Global Climate 2021 report, the past seven years are on track to be the seven warmest ever!

This report also highlights the impacts of climate change on food security and population displacement. Our lack of change is causing greater damage to crucial ecosystems and undermining progress towards the Sustainable Development Goals.

According to the landmark United in Science 2021, ‘We have reached a tipping point on the need for climate action.’ So what are we doing about it?

What is Sustainable Finance?

Often used interchangeably with “green finance,” sustainable finance involves making investment decisions that consider not only financial returns but also environmental, social, and governance (ESG) factors. It integrates investment decisions with essential criteria such as human rights, inequality, management structures, and executive remuneration for the lasting benefits of both clients and society at large. Sustainable finance is a necessary shift in the right direction towards a more climate focused world.

To give some examples, sustainable finance incorporates a wide range of activities, including sustainable funds, impact investing, green bonds, microfinance, credits for sustainable projects, active ownership, and sustainable development of the whole financial system.

Pillars of Sustainable Finance

Sustainable finance focuses on three pillars, environmental, social and governance, to ensure equal consideration across the most universal and fundamental needs.

Environmental : focuses on protecting the environment by mitigating climate effects and ensuring the sustainable use of resources. This drives biodiversity conservation, improved waste management, pollution prevention and the development of a circular economy.

Social : include issues of inequality, labor relations, inclusiveness, investment in human capital and communities, and human and animal rights.

Governance : includes good management structures, tax strategy, employee relations, and transparency within public and private companies. This pillar plays a fundamental role in ensuring the inclusion of environmental and social considerations in the decision-making process.

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Read more here.

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