Debate is unwarranted; there is no doubt that the world is confronting a climate crisis that demands immediate action. To survive and thrive, we need an overhaul of both business and production practices, and this is how to ensure financial sustainability. And if everything hinges on money, then we need to ask what is sustainable finance.
Principles of sustainable finance should include how we choose to travel for example. This could mean deliberately becoming a less frequent flyer to choosing a walk over a drive to the corner store.
In considering how to ensure financial sustainability, there is a lot that individuals can do to contribute to reducing consumption and waste. For governments, on the other hand, some policies and resources need to be put in place to support climate mitigation.
Then there is the responsibility of organisations which include:
As scientists warn that the eleventh hour is upon us, there are green shoots to indicate changed thinking in terms of sustainable finance.
What Is Sustainable Finance?
If there's one lesson to be gleaned from the numerous corporate advertisements that advocate sustainable solutions, it's the significance of the term 'sustainable.' Since 2008, we've discovered that many businesses embrace sustainability. Some of these include farming, coffee roasting, clothing production, fuel or construction. As this revolves around money, it is fair to ask: what do sustainable finance jobs look like?
Principles of sustainable finance are best understood through relatable examples.
From the end of World War II up until the early 1980s, businesses, irrespective of their type, demonstrated a more community-oriented approach. They took care of their workforces and typically collaborated closely with local and national governments to establish best operational practices. However, they were not necessarily known for being environmentally responsible, in part because the necessary technologies had yet to be developed.
The 1980s marked a seismic shift in the business landscape. Influential economist Milton Friedman had just asserted that the sole purpose of business was to simply maximise profits by any means possible. With the allure of profit, companies departed from the family and community-centric concept. Over time, working with governments towards social and environmental sustainability was replaced with a mindset to please shareholders through profits.
Of course, businesses are still driven by profit, however, there is a growing recognition that corporations could alter their business management to limit their adverse effects on the environment, society, and governance (ESG).
In considering how to ensure financial sustainability in this context, governance extends to employee relations and includes aspects like wages, benefits, and management practices. Issues like animal and human rights, workforce diversity, and consumer protection are also taken into account. The 'environment' category covers well-known concerns such as ethical sourcing, climate change mitigation and responsible resource management.
Sustainable finance involves the practice of considering the ESG impacts when making decisions regarding new projects.
In asking, what is sustainable finance, it is not about pouring money into ESG issues until they no longer pose a concern. By definition, such an approach would be unsustainable.
Instead, looking at ways for how to ensure financial sustainability, entails evaluating new investments that foster business growth while minimising ESG impacts. In a sense, sustainable finance can be seen as a return to the pre-1980s business model while still aiming to maximise profits.
How to Ensure Financial Sustainability in the Environment
At this point, it's essential to shift our focus. You might have gathered that the principles of sustainable finance include organisational governance that includes environmental and social guardianship.
Sustainable finance does include the finance industry per se, too. So, with this in mind, what does sustainability in financial governance look like?
Instances such as the deliberate concealment of research on environmentally harmful products like leaded gasoline for profit or the decision to outsource production to child-labour nations to boost shareholder wealth have contributed to our current predicament.
In a positive shift regarding how to ensure financial sustainability, the financial sector possesses substantial economic influence to support sustainability initiatives, invest in research and develop clean technologies and renewable energy sources.
In addition, it can endorse and provide financial backing to fair trade initiatives and organisations that prioritise sustainability in their operational strategies. In many ways, the concepts of corporate social responsibility and sustainable finance are closely intertwined. In cases where corporations engage in socially responsible practices, it doesn't always necessitate direct involvement from the finance industry; rather, the emphasis is often on corporate finance aligning with the commitments of these businesses.
Meet the Masters of Sustainable Finance Jobs
As with any movement that strives for change, there are usually a few individuals who step forward to lead the charge. Their primary responsibility is to ensure accountability and to uphold the organisation's overarching vision. A prime illustration of this leadership role can be found in Greenpeace, one of the oldest and most prominent environmental advocacy organisations.
Overall, in the realm of sustainable finance, three leaders epitomise the principles of sustainable finance.
Graham Sinclair
In the past, conventional business practices revolved around profit-driven enterprises aiming to maximise their earnings while shifting a substantial portion of the associated costs onto both society and the environment.
Graham Sinclair
Graham Sinclair, a renowned global project leader and ESG architect, has contributed significantly to sustainable investing. His role as a United Nations consultant involved developing ESG strategies for 25 emerging markets, which, in turn, facilitated the launch of programme-related investments (PRI) through collaboration with a network of 108 stakeholders from diverse geographical backgrounds. His ongoing work includes stakeholder engagement and index architecture for the Istanbul Stock Exchange Sustainability Index.
Kevin Hagen
Finance departments must incorporate the evaluation of risks associated with renewable energy contracts or conduct comprehensive analyses of the financial implications, considering both the balance sheet and profit-and-loss perspectives, for investments across the board.
Kevin Hagen
Kevin Hagen serves as an executive at an information management services company, holding the title of Vice President, ESG Strategy. Beyond his corporate role, he and his team guide global leaders and businesses on the development and implementation of sustainable business solutions. In addition, Hagen assumes the role of Chair for the ESG Council within the National Association of Real Estate Investment Trusts (Nareit) in the United States.
Carlos Vargas
Sustainable finance has come to the forefront as a response to a world that is now actively working to narrow social, racial, and gender disparities.
Carlos Vargas
Dr Vargas, who is a newcomer to the sustainable finance landscape, brings a fresh perspective. As a lifelong learner with a specialisation in financial analysis and business planning, he might initially appear to be a typical corporate executive. However, his role is distinctive in that it extends to teaching these very principles, as well as instructing on project financing, business planning, and renewable energy initiatives. Before his teaching endeavours in sustainable business practices, he dedicated a decade to the development of sustainable finance guidelines in collaboration with various global corporations.
Sustainable Finance Jobs
Today, it is evident that issues related to labour fairness and environmental conservation are receiving the attention they deserve in the media. Whether driven by their own volition or external pressures, it's becoming increasingly logical for businesses to shift their focus toward sustainability. This transformation necessitates the involvement of individuals at all organisational levels and spans from finance and human resources to research and development.
In response to the growing demand for sustainable development funding, more companies and governments are actively seeking solutions. This surge in interest is anticipated to lead to exponential growth in job opportunities within the finance sector. Unfortunately, there is currently a shortage of individuals possessing the necessary education, skills, and experience to fill these roles. Fortunately, several university study programmes now teach the principles of sustainable finance.
One of these programmes is the Master's in Sustainable Finance and Accounting offered by the University of Sussex. Developed in collaboration with the Global Assessment of Risk Professionals (GARP) and the Chartered Institute of Securities and Investors (CISI), this one-year curriculum covers topics like green finance, environmental accounting, and corporate governance.
The University of Cambridge provides an extensive six-week certificate course on sustainable finance, primarily designed for individuals already working in financial and corporate environments. Notably, the emphasis in this programme leans more toward financial sustainability rather than corporate social responsibility.
Across the Atlantic, the Harvard Extension School offers one of the most comprehensive sustainable finance and impact investment programmes around the globe. Their course catalogue includes a wide range of offerings, with some falling under the Economics department, while others are housed in the Environment department. Although Sustainable Finance is not a distinct degree plan, both undergraduate and graduate students have access to a selection of six online courses with Dr Vargas as the instructor.
Finally, in asking what is sustainable finance it is worth noting that less than five decades ago, the transition to rampant capitalism happened almost instantly. By contrast, the shift toward sustainability is expected to be a more protracted process, and we find ourselves in a race against time. Your role as a responsible steward in the field of sustainable finance awaits!
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