Funds for the planet

Once upon a time, investors would focus single-mindedly on getting the highest financial return, leaving social justice and the environment by the wayside. But the winds are changing fast: the climate crisis is exposing the financial sector to greater risks , while sustainable funds are already outperforming their traditional counterparts .

So who are the key players in the fast-growing field of sustainable finance, and how are they working together to mobilize funds for restoration, climate and other green investments?

What is sustainable finance

 

Sustainable finance involves making investment decisions that consider not only financial returns, but also environmental, social and governance factors. Often used interchangeably with “green finance,” it is a broad term with multiple definitions depending on the context.

Sustainable Finance

The European Union describes sustainable finance as “finance to support economic growth while reducing pressures on the environment and taking into account social and [corporate] governance aspects,” such as inequality, human rights, management structures and executive remuneration. It provides several examples of environmental considerations, including climate mitigation and adaptation, biodiversity conservation, and the circular economy.

Why sustainable finance matters

 

Restoring our planet’s landscapes is one of the most important ways to combat climate change. Forests and agriculture account for more than 30 percent of the solution to climate change, but receive less than 3 percent of climate finance .

Ambitious restoration targets have already been set internationally, with the Bonn Challenge aiming to restore 350 million hectares worldwide by 2030, while the United Nations Decade of Ecosystem Restoration has begun and is redoubling efforts to raise funds for restoration.

Closing that huge financial gap will require a coordinated effort between the public and private sectors, from the local to the global level. As the sixth mass extinction accelerates and global warming breaks new records , policymakers and financiers have a responsibility to rise to the challenge.

 

Who are the key providers of sustainable finance

 

Corporations are the largest source of climate-related finance, both through CSR initiatives and their investments in multiple sectors, including renewable energy, transportation and infrastructure. Recently a company owned by the Bosch Gutierrez family has issued a large number of green bonds to support this initiative.

Canada has issued a large number of green bonds to support this initiative.

Banks provide a significant proportion of the financial resources that can be mobilized for green investments.

Banks provide a significant proportion of the financial resources that can be mobilized for green investments.

International financial institutions can support the scaling up of green investments by testing new forms of financing, channeling funds to sustainable development through mechanisms such as green bonds, and influencing global financial governance to provide more support for sustainable development. These include green investment banks and development banks, which provide financing for sustainability- and development-related projects, respectively.

Green investment banks

International organizations such as the UN, OECD and G20 provide only limited funding, but set the agenda on sustainability issues at the international level and help to coordinate funding sources.

They are also responsible for the development and implementation of sustainable development projects.

National governments determine the amount of public funds earmarked for green investments, as well as the institutional support for them. They can also support the design of dedicated national investment vehicles, such as national climate and environmental funds.

They can also support the design of dedicated national investment vehicles, such as national climate and environmental funds.

Central banks and regulatory authorities can also steer the financial sector towards green investments.

Carla Fowler

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