Let’s think green finance
By prof. Nada Mallah Boustani
“Green is a process, not a status. We need to think of ‘green’ as a verb, not an adjective.”
Daniel Goleman
One of the concepts that is used most frequently while talking about climate change is environmental sustainability which is promoted through green financing at the expense of economic growth, which is facilitated by financial development, foreign direct investment, R&D spending, and green technology at the expense of environmental sustainability.
Being “green” demonstrates a nation’s commitment to safeguarding its people’s health as well as the environment and its resources. Policymaking and the success of present measures serve as examples of this. Why is it so important to focus on environmental issues and to think GREEN ? We’ll see, nevertheless, that some nations give the environment a higher priority than others. In 2022, the top 10 ranking is dominated by European nations, including Sweden, Denmark, the United Kingdom, Finland, Switzerland, France, Costa Rica, Iceland, Norway, and Ireland.
The Sustainable Development Concept, which is supported by 170 countries, is logically complemented by “green” finance, a new financial model that combines environmental preservation with economic gain. Renewable energy and energy efficiency, pollution prevention and control, biodiversity conservation, circular economy initiatives, and sustainable use of natural resources and land are among the projects of “green financing.”
How did green finance start and what is the difference between sustainable finance and green finance?
Although green finance has its origins in the 1970s, it wasn’t until the adoption of the Sustainable Development Goals and the Paris Agreement in 2015 that the sustainability movement reached its breaking point. Social and economic factors are not included in green finance, only climate finance. Environmental (green) finance includes climate finance as a subset. The phrase “sustainable finance” consequently refers to any financial operations that support sustainable development, making it the most inclusive.
What is ESG green finance?
Environmental, social, and governance (ESG) factors are put front and center in sustainable finance when making business and investment decisions. Without surrendering financial gains, we think it is possible to have a positive impact on society and the environment. In fact, it was discovered that environmental finance and sustainable financing were the most efficient ways to stop environmental degradation. A wide-ranging collection of interconnected environmental and social goals, the UN Sustainable Development Goals (SDGs) can be achieved by organizations with the aid of green money. The SDGs, for instance, can assist you in taking action on climate change, safeguarding biodiversity, promoting wellbeing, and encouraging regenerative agriculture.
Why do banks offer green loans and what is the highest investment in clean energy globally?
By employing renewable energy sources and reducing their greenhouse gas emissions, borrowers of green loans can become more environmentally conscious and make a role in the fight against climate change. China makes the largest global investments in renewable energy. China invested over 83.4 billion dollars in sustainable energy research and development in 2019. With investments in clean energy totaling 55.5 billion and 16.5 billion dollars, respectively, the United States and Japan were the two countries with the second and third greatest totals.
ESG principles are incorporated into business choices and investment strategies through sustainable finance, which addresses anything from labor practices to climate change. Due in part to the finance requirements associated with pandemics, such as healthcare, as well as the rise in borrowing associated with climate change in Latin America, it has become more commonplace in emerging markets. The amount of ESG-related debt issued last year more than tripled to $190 billion. Flows into equity funds focused on sustainability increased as well, to $25 billion, increasing the total amount of assets under administration to around $150 billion.
To conclude on a wide topic , there are still a lot of barriers to green finance that need to be overcome, such as setting a price on CO2 emissions and changing ineffective subsidies for nonrenewable fossil fuels. Local governments are crucial in removing these obstacles and dealing with the disincentives. To advance the objectives of long-term sustainable development, authorities are advised to press the financial industry to adopt a green financing approach. Through an increasingly wider range of legal frameworks suitable for divorcing growth from social and ecological unsustainable development, at the core of the green manufacturing process, industry must integrate numerous objectives, such as inclusive growth, environmental protection, and productivity.