- June 20, 2023
- Posted by: CIB Admin
- Category: CIBG News
Green finance and sustainable finance are types of financial activities that support the transition to a low-carbon, sustainable economy while addressing global challenges we face today, such as climate change and emerging environmental and sustainability risks. Green finance involves financing projects and initiatives that have positive environmental impacts such as reducing greenhouse gas emissions and promoting renewable energy. On the other hand, sustainable finance integrates environmental, social, and governance (ESG) factors into investment decisions to promote long-term economic growth, social outcomes, and environmental sustainability. Both green finance and sustainable finance aim to drive positive change by mobilising capital towards activities that promote sustainability and reduce negative environmental impacts.
Addressing climate change through finance is crucial because the global economy is heavily dependent on the use of fossil fuels and other non-renewable resources. This has led to an increase in greenhouse gas emissions, which are the main cause of climate change. To achieve a transition to a low-carbon, sustainable economy, it is necessary to mobilise capital towards activities that promote sustainability and reduce negative environmental impacts.
Green finance and sustainable finance are important tools for achieving this transition by redirecting investments towards environmentally friendly projects and integrating ESG factors into investment decision-making. By incentivising investments in renewable energy, energy efficiency, and other sustainable initiatives, green finance and sustainable finance can help reduce greenhouse gas emissions, mitigate the negative impacts of climate change, and help us to achieve a sustainable and resilient global economy that promotes long-term social and environmental well-being.
The key concepts of green finance are centred around achieving a sustainable and resilient economy that can address the challenges posed by climate change and promote a transition to a low-carbon economy. Examples of green finance initiatives include:
- Renewable energy and energy efficiency
- Pollution prevention and control
- Biodiversity conservation
- Circular economy initiatives
- Sustainable use of natural resources and land
Green finance encourages transparency and long-term thinking of investments flowing into environmental objectives and includes all sustainable development criteria identified by the UN Sustainable Development Goals (SDGs). As stated by Green Finance Platform, the two main goals of green finance are to “internalise environmental externalities and to reduce risk perceptions.” Promoting wide-scale green finance practices ensures that finances are directed towards green investments which are environmentally and socially responsible, such as ESG investments, socially responsible investments (SRI), and impact investments.
Green finance offers a range of benefits, including environmental preservation, climate change mitigation, enhanced risk management, market opportunities, social and governance impact, investor demand, and regulatory support. By integrating sustainability principles into financial decision-making, green finance contributes to a more sustainable and resilient economy. It supports initiatives aimed at reducing carbon emissions, promoting renewable energy, improving resource efficiency, and conserving biodiversity. By directing capital towards environmentally friendly projects, green finance helps combat climate change and protects ecosystems.
- Key concepts of sustainable finance
- Examples of sustainable finance initiatives and projects
- Benefits of sustainable finance
The key concepts of sustainable finance revolve around integrating environmental, social, and governance (ESG) factors into financial decision-making processes in order to place capital into projects which reinforce sustainable development.
Examples of sustainable finance initiatives include:
- Social impact bonds / Pay for success (PFS) schemes
- Sustainable investment funds
- Social venture capital
- Public institutional equity investing
Sustainable finance provides a range of benefits for both financial and non-financial outcomes, many of which are outlined in the UN Sustainable Development Goals. This includes societal impacts such as tackling poverty and world hunger, developing sustainable communities and housing, and achieving gender equality. Similarly, sustainable finance has a range of economic benefits through incentives such as the provision of education and decent work opportunities for all, as well as building resilient infrastructure and promoting inclusive industrialisation. Likewise, sustainable finance offers critical benefits to our planet, as it focuses on climate action and mitigating climate change, as well as tackling nature and biodiversity loss through preserving marine life and promoting sustainability throughout all ecosystems.
The best practices for implementing green and sustainable finance include developing clear goals and metrics, engaging stakeholders, and integrating ESG considerations into decision-making processes. Case studies of successful green and sustainable finance initiatives include:
- The Clean Energy Finance Corporation in Australia, which has invested over $10 billion in renewable energy projects since 2012
- The Climate Investor One fund, which provides funding for renewable energy projects in emerging markets.
However, green and sustainable finance also face several challenges, including an uncertainty around the definition of “green”, an uncoordinated approach to financial and environmental policies across governments, and a lack of investor demand for sustainable investments. Addressing these challenges will require collaboration between governments, investors, and finance professionals across the world.
Updated for 2023, the Certificate in Green and Sustainable Finance is a valuable credential for professionals in the global banking sector seeking to advance their careers in finance and sustainability. The Certificate program covers key skills and knowledge related to Green and Sustainable finance, including climate change and its impacts; climate risks and emerging environmental and sustainability risks; the evolution of green and sustainable products and services in the banking, investment and insurance sectors; and, increasing awareness of the role of the finance sector and finance professionals in supporting the transition to a low-carbon world.
- Guided self-study supported by a wide range of interactive e-learning units and knowledge checks;
- 12-unit programme that can be completed in as little as 12 weeks. Registration lasts for 1 year, so you can also work through at your own pace;
- Includes the latest assessment of climate science from the IPCC (AR6), published in 2021 and 2022.
- Assessed via 90-minute, multiple-choice examination, conducted via remote invigilation.
The Certificate can help banking professionals across the globe demonstrate their commitment to green and sustainable finance practices, and develop the skills needed to create meaningful change in a rapidly changing global economy.
Upon completion, learners will be entitled to use the designation GSFP (Green and Sustainable Finance Professional).
Green and sustainable finance practices are critical to addressing climate change and building a more sustainable and resilient global economy. By supporting environmentally friendly projects, integrating ESG considerations into investment decision-making, and promoting long-term economic growth, green and sustainable finance can help create a better future for all. For those seeking next steps to implementing green and sustainable finance practices within their own role, the Certificate in Green and Sustainable Finance is a valuable tool for finance and sustainability professionals seeking to advance their careers and make a positive impact on the world.
Credit: Chartered Banker