Sustainable finance and investment is a relatively new concept, but it is basically an innovative way of reconciling environmental preservation and social responsibility with economic activity, and then adding value to it all. Sustainable finance is a sophisticated way of shifting capital to companies that are smart enough to position themselves to take advantage of opportunities arising from the new marketplace. Sustainable investment is the same as traditional investment in that capital placed in companies that do the fundamentals well. Growth projections are based on sound management and business principles. But now, growth projects and fundamentals depend on the new variables of the triple bottom line – profits, people, and the planet.
Sustainable finance and investment favors companies that:
- Have identified and developed emerging markets for their products and services;
- Devise and market technologies (both “hard” and “soft”) that meet pressing environmental, social and economic needs;
- Use every environmental efficiency that is economically viable.
However, sustainable finance and investment differs from the traditional services in that money will come first from investors who share an understanding of the new economic paradigm of sustainability. As the sector demonstrates its ability to generate competitive returns, more investors will be attracted into it and the entire world will benefit.
Sustainability can add value, in terms of the economic, environmental and social objectives of communities and nations. This thinking translates the concept of sustainability into language that the average businessperson comprehends. As sustainable finance and investment becomes more prevalent, the company that does not add value to a product or service will be forced to leave the marketplace, especially in today’s increasingly competitive global economy.
Benefits of Sustainable Financing and Investment
Sustainable finance and investment has grown enormously in the past decade. In the past, it was regarded as a fringe interest, mainly for small investors or banks with strong views on the environment and human rights. Since then, the amount of money invested in sustainable funds and companies has increased dramatically, and many of the large financial services firms have begun offering their clients a sustainable option.
This increase in capital flow to sustainable investments and directly to companies has reinforced the market’s view the sustainability matters. Banks must now consider how their financing arrangements are going to effect the environment and community at large.
Integration of sustainability into the banking sector offers two key directions:
- The pursuit of environmental and social responsibility in a bank’s operations through environmental initiatives (such as recycling programs or improvements in energy efficiency) and socially responsible initiatives (such as support for cultural events, improved human resource practices and charitable donations);
- The integration of sustainability into a bank’s core businesses through the integration of environmental and social considerations into product design, mission policy and strategies. Examples include the integration of environmental criteria into lending and investment strategy, and the development of new products that provide environmental businesses with easier access to capital.
Banks or investors which ignore the new importance of sustainable practices not only risk collateral damage to their reputations, but also to shareholders’ capital, if environmental or other social liabilities impact the cash flows and residual value calculations on long-term asset finance and investments.
How can Beyond Smart Cities help?
Beyond Smart Cities actively seeks out firms that are breaking new ground in social and environmental performance. As an independent entity, Beyond Smart Cities will offer reviews on company policies, initiatives, and sustainability performance to assist banks and investors in sustainable finance and investment decisions. Firms that demonstrate compliance with internationally recognized standards for sustainability will be recognized as potential investment opportunities. Beyond Smart Cities will compile data and monitor corporate activity to ensure that sustainable policies are implemented and shareholder value is created.
In addition, Beyond Smart Cities can help develop long-term strategies for investment in sustainable markets and help enterprises offer new opportunities to attract investors. Companies seeking to attract sustainable financing and investment can look to Beyond Smart Cities for policies and strategies that match core competencies and market dynamics.
