The transformational power of sustainability
The drive to sustainability is transforming the way we all think about and, increasingly, live our lives. Specifically, from a finance and funding perspective, Environmental, Social and Governance (ESG) considerations are progressively dictating the shape of investment decisions.
Investor decision making is no longer a simple choice of maximising profitability whilst minimising risk. Sustainable finance is prioritising businesses that help the environment but also focuses on parallel issues such as inclusion and the adoption of ethical business standards.
In simple terms this means investing for impact where capital will make the world a better place.
Sustainable finance and investment cover a broad spectrum of activities, from green energy projects to companies demonstrating ethical supply chains or strong social values such as inclusion or female representation.
It is not an understatement to say the emergence of sustainable finance has a key role to play in the world’s transition to net zero by channelling both private and public money into carbon-neutral projects, as highlighted at COP26.
Governments and both international and national regulators are prioritising calls to ensure that sustainable finance can deliver on the bold promises.
The challenge remains for funders, investors and businesses to demonstrate the ability of projects to generate the financial returns sought whilst supporting the planet and making society fairer and more inclusive.
Currently, the evidence base is thin although growing with some bold commentators claiming that sustainable businesses actually offer higher returns for investors.
For now, those businesses demonstrating a strong ESG rating point towards a positive long-term performance. Positive early indicators therefore continue to see capital attraction towards sustainable investment funds and an increasing focus from traditional SME lenders and private investors.