Sustainable finance has been booming in recent times with a goal of motivating everyone to make financial decisions that support sustainability. It aims to lessen the pressure on climate change and environment by introducing ESG (environmental, social and governance) considerations in the heart of responsible finance. The social considerations include the concepts of inclusiveness in financing, closing financial inequalities, human resource, employee rights and human rights. There are many facets of sustainable finance that help in building a fairer economy.
Bridging inequality
Closing the gap of economic inequalities is crucial to ensure that sustainable finance is benefiting everyone, particularly those who are furthest behind. The UN’s agenda to achieve the SDGs by the 2030s highlights the importance of bridging inequality at both the national and international scale.
Accountability
Sustainable finance puts pressure on companies around the world to be more accountable with their carbon footprints specifically and their social responsibility as a whole. This helps in being more transparent with their activities, encouraging ethical behavior along with better risk measurement and management.
Financial inclusiveness
Financial inclusion is particularly important in emerging economies. It aims to provide financial services to the “unbanked” citizens or businesses in a way that is accessible, sustainable and lawful. Financial inclusion can also bridge the gender gap as many women in developing countries lack sufficient banking resources.
SSE (Social and Solidarity Economy)
SSE is a concept that focuses on promoting those organizations that have a strong social compass and conduct their activities to fulfil their economic goals with a sustainable mindset. This could be a cooperative, social enterprise, mutual benefit society or other such associations which focus on supporting environmental action. Since they don’t operate on a monetary motive, they need more capital to become more popular.
Value-based banks
Bank customers are now more ecologically conscious than ever and choosy about who they conduct their banking with. Value-based banks are on the rise today whose key principles include addressing the concerns laid down in SDGs. Sustainable banking supports the national economy but also promotes local SMEs which constitute a sizeable portion of economic growth.
Human rights
The goal of sustainable development is to create a sustainable society where nobody suffers from poverty, discrimination, lack of access to basic healthcare or education. The concept of labor relations and Investing in skills and communities also falls under this. It has a close relationship with the field of sustainable finance as a thriving economy means increased participants for sustainable finance.
