Sustainable finance

Sustainable finance is the set of practices, standards, norms, regulations and products that pursue financial returns alongside environmental and/or social objectives. It is sometimes used interchangeably with Environmental, Social & Governance (ESG) investing. However, many distinguish between ESG integration for better risk-adjusted returns and a broader field of sustainable finance that also includes impact investing, social finance and ethical investing.^[1]

A key idea is that sustainable finance allows the financial system to connect with the economy and its populations by financing its agents in seeking a growth objective. The long-standing concept was promoted with the adoption of the Paris Climate Agreement, which stipulates that parties must make "finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development."^[2] In addition, sustainable finance has a key role to play in the European Green Deal and in other EU International agreements, and its popularity continues to grow in financial markets.^[3]

In 2015, the United Nations adopted the 2030 Agenda to steer the transition towards a sustainable and inclusive economy. This commitment involves 193 member states and comprises 17 goals and 169 targets. The SDGs aim to tackle current global challenges, including protecting the planet. Sustainable finance has become a key cornerstone for the achievement of these goals.^[4]