FUTURE OF FINANCE IS SUSTAINABLE AND PROFITABLE

Ms.K.Sindhuja, Assistant Professor, SIMS

“An investment is deemed an investment only through its returns.”- Lamine Pearl heart

The finance ecosystem—clients and employees, shareholders and stakeholders—is striving for purpose and sustainability. Environmental, social and governance (ESG) considerations are at the fore front of financial decisions, supported by the Sustainable Development Goals (SDGs) and increased awareness of the climate emergency. Sustainable finance is sometimes referred to as green finance, but it’s not just about reducing emissions or preventing environmental damage.

Environmental concerns include air and water pollution, deforestation and biodiversity. More generally, they relate to how a company performs as a steward of nature. Social factors reveal how well a company manages relationships with employees, suppliers, customers and the communities with which it engages. Social issues vary from diversity in the workplace to human rights and labor standards across the supply chain.

The importance of sustainable finance was explained succinctly last year by James Gorman, CEO of Morgan Stanley: “If we don’t have a planet, we’re not going to have a very good financial system.”Recently, attitudes have started to change, and the private sector is beginning to take its commitment to the environment seriously.

Sustainability is now a Global concern:

31% of American consumers say they have rewarded companies that are taking steps to reduce global warming by purchasing their products in the last year.

21% percent of American consumers say they have punished companies for opposing climate action by avoiding their products.

In a Unilever study, 21 percent of the people surveyed across five countries said they would actively choose brands if they made their sustainability credentials clearer on their packaging or in their marketing.

Shoppers say they feel better when they buy products that are sustainably produced (53 percent in UK, 78 percent in US, 88 percent in India).

Financial growth is no longer a firm’s sole performance metric. Non-financial objectives, particularly ESG criteria, are gaining traction. Consumers want companies to be mission-driven as well as focused on generating shareholder value.

Sustainability makes business sense and lowers operational risk

Classical economic theory stated that the valuation of a company or asset should be predicated almost exclusively on the bottom line.

Sustainable firms attract and keep better skilled and more committed employees and have more loyal customers. Their stronger relationships with stakeholders mean, in turn, that their social license to operate is more secure.

Recognizing investment opportunities: 

The transition to a sustainable economy offers considerable investment opportunities present in frameworks such as the Sustainable Development Goals, or in the growth of the renewable energy and energy efficiency sectors. For example, embedding climate considerations into asset allocation through investments in renewable and other low-carbon technologies offer the finance sector a way to achieve improved returns while also contributing to the low carbon transition.

Thus, these sustainability principles serve to maximize their opportunities and to minimize the negative impact their core operations have on the environment, and the communities and economies in places where they operate.

“We make a living by what we get, but we make a life by what we give.”– Winston Churchill