Introduction
Various activities have been carried out around the world in recent years to create a sustainable society. One of them is the term “sustainable finance,” which we hear a lot but few people understand. What does sustainable financial activity entail, and what is its primary goal?
The meaning and purpose of sustainable finance
Sustainable finance refers to financial services that consider environmental, social, and governance considerations when making business and investment decisions in order to benefit customers and society (MySign, 2018). Its primary goal is to contribute to the United Nations Sustainable Development Goals (SDGs) by addressing ESG issues through various means. Integrating governance factors into financial decisions, as well as stabilizing the financial system through governance risk and opportunity management, work to meet people’s long-term needs (Capital Markets Malaysia, 2020).
Concrete initiative for sustainable finance
There are many initiatives to achieve sustainable finance:
・CSR-SRI (Sustainable Responsible Investing)
In accordance with ESG standards, the provision of funds and services to poor and struggling communities is prioritized. Moreover, collaboration with other companies to allocate capital for social and environmental benefits is done (Impactgarden, 2019).
・ESG
Business practices are based on environmental, social and governance standards (Impactgarden, 2019).
・Impact investment
Gain financial, social and environmental benefits by choosing and managing our investments (Impactgarden, 2019).
・Venture Philanthropy
Aligning the spirit of philanthropy with the spirit of investment, giving high engagement and approach to positive social impact (Impactgarden, 2019).
・Green Bond
Green bonds are bonds that are important for realizing sustainable finance. It is issued to fund projects that have a positive impact on the environment and climate (Impactgarden, 2019).
Effective of sustainable finance
・Reduce costs and increase efficiency
The more sustainable the business, the less resources it uses and the lower the cost is (Accounting for Sustainability, 2021).
・Business innovation
Over time, the finance term’s updating of business technology, processes, and so on leads to innovation. Sustainability can transform both technology and organizations (Accounting for Sustainability, 2021).
・Employee development and improvement
We gain a competitive advantage by valuing capital and investing in people specifically through:
- improving relationships with stakeholders;
- increased efficiency and reputation;
- cost-cutting measures; and
- increasing staff retention.
Other effects include risk avoidance and the creation of new competitiveness (Accounting for Sustainability, 2021).
Conclusion
Efforts are being made all over the world to achieve sustainable finance. There are numerous types of these activities, all of which have a positive impact on the environment, society, and the economy. We will be able to live more efficiently if each of us does what we can to realize a sustainable society.
References
MySign (2018). What is Sustainable Finance – Swiss Sustainable Finance. [online] Swiss Sustainable Finance. Available at: <https://www.sustainablefinance.ch/en/what-is-sustainable-finance-_content—1–1055.html> [Accessed 21 December 2022].
Capital Markets Malaysia (2020). Sustainable Finance Overview – MSFI. [online] Malaysian Sustainable Finance Initiative. Available at: <https://www.msfi.com.my/sustainable-finance-overview/> [Accessed 21 December 2022].
Impactgarden.org (2019). Impact Garden – Sustainable Finance and Impact Investing. [online] Impact Garden. Available at: <https://impactgarden.org/sustainable-finance/> [Accessed 21 December 2022].
Accounting for Sustainability (2021). Why sustainability and finance? [online] Accounting for Sustainability accountingforsustainability.org. Available at: <https://www.accountingforsustainability.org/content/a4s/corporate/en/about-us/why-sustainability.html> [Accessed 22 December 2022].
