ESG in Action: How Finance Fuels the Sustainability Revolution
As the Climate Crisis deepens, the financial sector will play a key role.
Without the financial sector's support, it's becoming increasingly challenging to elevate global awareness about environmental issues. After all, money not only talks—it propels action.
Investment is crucial to projects and businesses that are committed to environmentally sustainable strategies and are pioneering innovative energy solutions. But what exactly is sustainable finance, and why is it so important?
What is Green Finance?
In layman’s terms, World Economic Forum defines green finance refers to any “ green finance is any structured financial activity – a product or service – that’s been created to ensure a better environmental outcome.” There's a growing demand for greater accountability, and green finance is stepping up to meet this need.
There has been a significant increase in the availability of green finance for businesses aiming to go greener. More importantly, both public and private investment sectors are now insisting that businesses adopt ESG strategies as a prerequisite for investment.
Investors are increasingly asking themselves:
"Why should I invest my resources today to support your business growth tomorrow?"
Without solid ESG strategies, the straightforward answer is: you shouldn't.
What is ESG?
If you want to check how sustainable a company is, you will need to look at its ESG report. ESG has become a hot topic in the boardrooms, and an increasing requirement for investors, employees and customers. As a business, if ESG regulations don’t affect you yet, they will soon.
To learn more about ESG, check out our blog from last week Breaking Down ESG to Easy Peasy ESGeezy or our 2022 blog on ESG reporting!
Change, as can be with anything, is slow and frustrating. However, history has shown that enterprises and businesses are generally more capable at taking decisive action than most governments. This highlights the financial world’s critical role in addressing the climate crisis and promoting sustainability on a larger scale and on a much shorter timeline.
“Banks are driven to take action on climate change not only because of regulation. As climate risk becomes more evident and starts impacting the bottom line of businesses, banking players have a commercial opportunity - to finance the green agenda and maintain a leadership position, which is defined by customer growth, employee loyalty and overall revenue improvements." - Lubomila Jordanova .
ESG Investing
From my research, given the context of ESG, sustainable finance is now encapsulating this new business strategy because it influences investment decisions that consider the environmental, social, and governance aspects of economic activities or projects
"The investment giant Blackrock proposes reaching its plea of “net-zero” by 2050, which implies a drastic reduction in greenhouse gas emissions. That a leading global investment manager is pursuing such an ambitious goal is significant. The world has to pause for a second, take a deep breath, and think about how to cater options given the more than $9 trillion in assets that Blackrock manages. This might be just the beginning of the unprecedented opportunity for sustainable finance. It may even be just the push that global economies need to truly align with the Paris Agreement." Dr. Carlos Vargas, Lecturer of Sustainable Finance and Investments; and Environmental Economics.
Investors and customers want transparency and that should be the sole focus when implementing ESG strategies in your business.
Speaking of transparency, the European Parliament solidified its commitment to sustainability by adopting the Corporate Sustainability Reporting Directive (CSRD) back in November 2022. The CSRD mandates that large companies and all listed entities disclose information on their environmental, social, and governance (ESG) impacts. This move towards enhanced transparency is essential in light of recent global challenges such as the war in Ukraine and rising populism, which have tested the resilience of ESG initiatives. There is no question that when applied transparently and with true sustainability intentions, ESG is a positive thing.
Adding to the urgency of these developments, the World Economic Forum notes that the disruption to energy markets caused by Russia's invasion of Ukraine is accelerating the transition of financial systems and government policies towards lower carbon sources. “This shift in capital and investment may be uncomfortable in the near term, especially as populations struggle with the cost of living, but the backdrop for these sorts of decisions has put an indirect price on carbon – something fundamentally important that the world has not yet been able to officially agree on.”
Similar regulatory developments are unfolding in other regions, including the Middle East, as countries recognize the importance of ESG in securing a sustainable future. For example, the United Arab Emirates and Saudi Arabia are encouraging listed companies to adopt ESG reporting practices. The Dubai Financial Market (DFM) has issued ESG reporting guidelines, and Saudi Arabia's Vision 2030 underscores sustainability as a crucial element of its economic transformation. Although these initiatives are currently more voluntary than the CSRD, they signify a growing regional commitment to align with global sustainability standards, suggesting that stricter regulations may soon follow.
Amid these significant shifts, progressive thinkers and industry leaders are already capitalizing on the surge in assets and securing their investments for a sustainable future. Are you ready to join them on this journey?
Take the reins of change within your organisation by enrolling in our ESG Leadership course. With new cohorts beginning on September 26th and November 6th, this is your chance to become a key player in sustainable business practices. Book a call today and transform your business towards a more sustainable future!
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The FSG Team đź’š
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Who We Are: Fifty Shades Greener
Sustainability with a side of sass!
At Fifty Shades Greener, we’re not your typical sustainability crowd. Here, green isn’t just a color; it’s a lifestyle, and we live it with a bit of cheek and a lot of heart. Our team, a quirky blend of lifelong greenies, seasoned educators, and fresh innovators, believes that every little bit helps and that education is the cornerstone of sustainable change. Born from a simple idea in a hotel’s green team meeting, we've grown into a vibrant community passionate about turning the hospitality world a shade greener. We think greenwashing is as outdated as last season's fashion and are here to ensure sustainability is as authentic as it is actionable. From the early days in Doolin to the bustling workshops of today, our journey has been about making sustainability accessible, understandable, and, dare we say, fun. We don't just throw jargon around; we break it down with practical advice and real-world actions that everyone, from hotel managers to cafe owners, can take. So, whether you’re looking to start your green journey or you're trying to make your business a beacon of sustainability, we’ve got the know-how and the can-do attitude to help you make it happen. And while we’re serious about what we do, we believe a little humor goes a long way. After all, if you can’t have a laugh while saving the planet, when can you? Join us as we continue to write our story, one green step at a time. Here’s to making sustainability not just a necessity, but a norm. Ready to add a little green to your scene? Dive in—the water’s fine, and it’s getting greener by the minute!
