For those who do not know, sustainable finance refers to any type of financial service that integrates environmental, social, or governance into the business or the investment for that matters. It might sound like something that just popped up on the radar, but it has been around for some time.
Years ago, sustainable finance was not a hot topic it is today, as a matter of fact, you would barely hear about it. However, in the modern day and age, you can find it everywhere, and that is good.
This new mainstream attention and highlight is certainly a great thing for this type of finance, as it is reported that the market for sustainable finance is estimated to have a worth of $380 billion per year. This means that at this point, the sustainable finance has the same capital influx as the renewables did last year.
However, it is better to think realistically. For one instance, if we are taking the foray into the low-carbon economy seriously by 2050, it is not going to be cheap. Just the energy sector alone would require an annual price tag of $3.5 trillion per year.
There is no doubt that sustainable finance is a great way of removing the carbon from the economy, but if we are to achieve that, we are in need of a leadership that is radically different, as well as a leadership that thinks about the future rather than that present.
Money, no doubt, is one of the biggest driving forces, as we all know. Now is the right time to ask the richest some serious questions. How did this point arrive, and what is the way out? We need talk about strategies that be used to keep the capital under check, and make sure that we are doing something to keep the climate control under control.
The economy already speaks for itself, for starters, the global energy mix only comprises of 15 percent of the renewable fuels. But this is the point where things get bleak, the US car sales in total only have 1 percent of electric cars. The carbon footprint that is left by construction of buildings has been at 39 percent.
For all the sectors that are burning through energy, it is not possible to stay in place without the proper financing. But the question is “who is financing them”. Well, we are the reason we are financing. While we do not have a direct part in it, but the entirety of the financial sector is behind that, and we are just a part of that sector.
If we want to consider ourselves sustainable financers, it is up to us to become bold, and deal with all the contradictions that are taking place within the industry. For a long time, the financial sector doing its best to protect the climate, while at the same time, it is also taking a huge toll on it. This is not something that will stop until we take the right step.
Taking this step will obviously result in a backlash, and there is no doubt about that. However, if we don’t speak up, then who will?
Additionally, we need to be transparent about sustainable finance. Sure, it is just a small part of the entire market, but the fact that it has the power to change the economy for makes it a driving force, and a reason for all the governments, businesses, as well as everyone who is investing for themselves to invest after considering the sustainable finance.
However, in reality, the situation of sustainable finances is not as wide as you might think it is. Only the most honest analysts are doing the job of finding the right investments on sustainable finances, but other than that, everyone is in the race for getting rich.
Professional investors will always go by the opacity. However, that does not mean that we can practice it in the wrong way, and call it the right thing. If we really want things to change, then we need to break the circle, so we can act as an example for others to follow.
The least we can do is put a system in effect that discloses the flow of climate finances, as well as tells us about the actions that need to be taken. The system is there with the name Task Force on Climate Related Financial Disclosures, it just needs to be properly implemented on the larger scale.
Lastly, the sector of sustainable finances is in dire need of a new leadership that is more inclined towards the future. Starting this finance sector was not an easy job, as it required a lot of focus. Now that it has achieved the maturity, the next step is to take all these qualities and start spreading them to the outer circles.
Trying to change the elements of the society that are not sustainable is just a start. We also need to try to change the elements because of which this economy is working. This means legislators, as well as the company owners will have to come into the fold, and this is not something that can be done on a lower level, but they need to use their influence and power and make sustainable finance a norm at the higher level as well.
Finance’s future has to be sustainable, because if it is not sustainable, then there will be no future at all. This means that we have to collectively stand up, and make things clear for everyone. If sustainable finance is the only way to remove the carbon from the economy, then it is time to take the charge, and start forming a new leadership, because if we don’t, there will be nothing left to protect.