What is sustainable finance or ESG?

Although it may seem like a new concept, sustainable finance has been around for more than two decades. However, in recent years their evolution and implementation has accelerated since they have values that are highly demanded by society.

Nuria has savings that she would like to make a profit on, so she has thought about doing an analysis to invest them in a company in line with her ethical values and care for the environment. This type of socially responsible investment is one of the possible products that fall within what we know as sustainable finance.

What do we understand as sustainable finance?

The economy has a very important role in society, that is why it cannot remain oblivious to its needs. Currently, one of the most transcendental challenges facing humanity is that of sustainability , that is, to be able to continue growing without having a negative impact on the planet, mitigating the devastating effect of the climate crisis, and on the future generations, reducing the gap with the most disadvantaged groups.

To achieve this, the collaboration of the public sector and the private sector, together with the individual and collective responsibility of citizens, is essential. Aware of this, the financial sector has made sustainable finance one of the main keys to building a more responsible future.

From an eminently ethical perspective, sustainable finance is translated as those investment decisions that are made taking into account social and environmental factors. Consequently, the entities of the sector have created a series of products that integrate ESG criteria (ESG, in English) satisfying the demands of clients interested in more sustainable investments and acquisitions and thus contributing to the transformation of society towards a development model more responsible.

The ESG criteria refer to a series of factors that tell us how business activities are carried out. The definition of each of these criteria is as follows:

A for Environmental: refers to the actions carried out by organizations that have an environmental impact, both directly and indirectly. This criterion includes the emission of greenhouse gases, the protection of biodiversity, the use of renewable energy sources, energy efficiency and other issues that have an impact on the environment.

S for Social: this criterion has to do with those business practices that affect society. Here we must look at the corporate values of the company and how they carry out their fulfillment: the rights of workers, salary conditions, diversity and inclusion in the company and other aspects of the social environment such as guaranteeing customer satisfaction.

G for Government: corresponds to the management of the governance, transparency and administration of the company; to the criteria that organizations follow in their rules and procedures. Some factors to take into account is that the objective is to reduce the wage gap, the glass ceiling and eliminate any other type of discrimination based on sex, age, religion, sexual orientation and disability.
What types of sustainable financing exist?

We can choose from a wide variety of financial products that meet ESG criteria, ensuring that they have a social commitment and that they drive growth and sustainable development:

Sustainable investment funds : this type of investment satisfies the need to deposit our money in projects that are consistent with our ethical values. Therefore, we can find investments in companies that focus their efforts on innovation , improving energy efficiency and social conditions.

Green and social bonds: are the debt securities issued by organizations that are destined to finance socially responsible projects.
Social risk capital: this activity consists of investing in companies whose mission is to provide solutions to social and environmental problems. Social venture capital investors expect both a profitability and a sustainability benefit.
Green loans: these are credits designed to finance projects that help preserve the environment, such as the purchase of more efficient appliances, less polluting cars, etc.

Do you want to continue discovering the keys to sustainable finance? Learn more in this Finance for Mortals article .
Why invest in sustainable finance?

The financial sector is immersed in a transformation process to adapt to the needs and concerns of society. This change has experienced great momentum in recent times, thanks to initiatives such as the Net Zero Banking Alliance (NZBA) , where entities such as Santander, which is also a founding member, are committed to achieving an economy with zero net emissions, adapting their portfolio of products towards sustainable finance.

With the same purpose, the European Union and various public bodies have reinforced their commitment through policies based on the mitigation of climate change and the inclusion of the most disadvantaged groups.

For their part, investors do not want to renounce their ethical and ecological values, so they prefer to include in their portfolios those business activities with economic models responsible for the environment and society.

There are studies that indicate that sustainable finance is increasingly in demand by citizens. The report "Other consumption for a better future" carried out by New Economy and Social Innovation (NESI) and the Organization of Consumers and Users (OCU) shows that, in countries like Spain, 73% of the population make economic decisions taking sustainability criteria into account .

In short, investments in sustainable finance give us the opportunity to positively impact society and the planet. It is an investment that helps promote businesses that are committed to renewable energy and more supportive and responsible economic models. If you want to know more about sustainable investments, access this Openbank article .

FDI Sources :

https://biol.me/fdiindia/

http://www.conejousd.org/sequoia/User-Profile/UserId/109245

https://www.linuxfestnorthwest.org/users/6301/

https://www.theloop.com.au/neerajagarwal/portfolio/Press-Public-Relations/Ghaziabad

https://www.quora.com/How-do-I-get-a-business-loan-in-India-What-are-the-tax-advantages-of-business-loans/answer/Aadesh-Reddy-3

http://charma.uprm.edu/twiki/bin/view/Sandbox/FDIIndia

https://pubhtml5.com/homepage/unnb

https://www.sporcle.com/user/fdiindia/

https://www.howeasyy.com/fdiindia

https://www.easyfie.com/fdiindia

https://canund.com/fdiindia