Sustainable Finance Blog 2 – Why Sustainable Finance?

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My first blog of sustainable finance gives you a brief introduction to sustainable finance. The second blog will give you a general idea of why people choose sustainable finance.

Sustainable finance based on the sustainability, which means in financial activities, people should consider the needs of future generations, rather than short-termism. This could be regard as the ultimate reason of sustainable finance. International Platform on Sustainable Finance (IPSF) established for the services of countries in the world for exploring better sustainable finance. Therefore, at the level of human beings or state, we can say sustainable finance is for:

Having a sustainable development in long-term period

If you access the website of banks or investment companies, sustainable finance of investment is now definitely displayed with prominently:




For financial product providers, sustainable finance is not only could attractive potential sustainability investors, but also bring them other benefits such as better financial performance in general (Ortas, et al., 2015; Lee, et al., 2016) and risk reduction (Jansson & Biel, 2011). As more and more academic researchs and famous financial insituations like Morgan Stanley (2019) claim mutli advantages of sustainable finance, the relevant stocks, funds, portfolios are becoming popular and promted. Excepts these, engaging with sustainable finance could build a good reputation and image of bank or company. For some sustainability projects, government will provide welfare like discount or particular policy. Therefore, at the level of financial products providers, sustainable finance is for:

Better financial performance, reputation, and more sources

Naturally, with the overwhelming coverage about sustainable finance, most of investors show great interest in sustainable finance and belief it will earn. Of course, there are also investors purely seek opportunities of helping sustainable development; interestingly, these investors are more focus on self-value achievement and has higher risk tolerance to their sustainable investment (Paetzold & Busch, 2014). Therefore, at the level of investors, sustainable finance is for:

Better earning opportunity, realization of self-value

Generally speaking, sustainable finance nowadays takes sustainability as the core, different groups based on this core enjoy the benefits its extents.

References

Jansson, M. & Biel, A., 2011. Motives to engage in sustainable investment: A comparison between institutional and private investors. Sustainable Development, 19(2), pp. 135-142.

Lee, K.-H., Cin, B. C. & Lee, E. Y., 2016. Environmental Responsibility and Firm Performance: The Application of an Environmental, Social and Governance Model. Business Strategy and the Environment, 25(1), pp. 40-53.

Morgan Stanley, 2019. Sustainable Reality, s.l.: Morgan Stanley.

Ortas, E., Álvarez, I. & Garayar, A., 2015. The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact. Sustainability, 7(2), pp. 1932-1956.

Paetzold, F. & Busch, T., 2014. Unleashing the Powerful Few: Sustainable Investing Behaviour of Wealthy Private Investors. Organization & Environment, 27(4), p. 347–367.

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