What is sustainable financing?
What is sustainable finance? The solution to the problem. What problem? Next: If you watch the news every morning, you might be quite worried about the environment and the direction the world is going. You are not the only one. More and more people are realizing that the way we do things is simply not sustainable.
Many of these people blame the rich and powerful businessmen for the current state of the world. Although they are not entirely to blame, as many claim. The cliché about the millionaire who doesn't mind destroying the environment to become a millionaire is true. Over the years, countless corporations have abused the Earth's natural resources for greater profits. The damage caused by this cannot even be described.
But things may change dramatically in the coming years; change for the better. It could be argued that the commercial approach to the environment only existed because we did not know a more responsible way of doing things. But now we know it and many are starting to apply it. This is called sustainable finance.
Perhaps you have heard about it and want to know what this new way of doing actually consists of. In this article, we give you all the information you need to learn about this new concept.
What exactly does sustainable finance consist of?
It's a relatively new concept, so it's common enough that not everyone has heard of it. And those who have heard it do not know what it really means. If this is your case, don't worry, in this article we will illustrate it for you. As the name suggests, sustainable finance is a type of financing. A bank or similar entity provides financial support to another institution in order for it to achieve some goal or objective. Previously, it was normal that the goal or objective was to make the company more efficient in terms of profit.
But today, many financial institutions have decided to develop a more ecological financial system because it is known that such approaches actually cause great damage to the ecosystem. Focus on green projects, ie. projects that help the planet recover from damage rather than harm it. These projects can basically be anything, if they focus on transforming the company into an institution that supports ecological sustainability. We make it less harmful to the environment. Sustainable financing can be used, for example, to convert electricity to solar energy or similar projects. This is called a sustainable transition.
Another category of publicly supported projects with sustainable financing are the so-called green projects. Projects that promote and help restore the environment. This category includes projects that promote, for example, the use of renewable energy or the implementation of non-polluting transport.
Simply put, while traditional financial systems focus almost exclusively on creating financial benefits, the main goal of sustainability is to work together to solve environmental and social problems. This approach has recently produced good results, achieving its original proposal: to build a sustainable world with a sustainable economy.
In addition to the environmental benefits of sustainable financing, it could be argued that there is no real benefit to the company implementing the goals of the financing. However, it must be taken into account that these companies receive more favorable working conditions. In addition to getting some recognition for our commitment to the environment and society.
The future is likely to be set by a sustainable economy which, together with the efforts of environmentalists and public awareness, will help us leave a better world for future generations.
Which companies can apply for sustainable financing?
Not all companies can apply for sustainable financing, as it only targets companies that meet certain requirements. These requirements assure the financier that the financed company is truly committed to improving the environmental condition of the Earth.
First, sustainable finance can only be applied to green projects. Second, the company or entity applying for funding must adhere to regulations that promote standards where the business is sustainable.
They have social demands. For example, they make sure that the company they support literally respects human rights or is dedicated to some kind of social work.
If companies meet the requirements described above, they can apply for sustainable financing and thereby contribute to improving the environment. It is worth mentioning that it does not matter whether the entity requesting funding is public or private. Both can apply for it and enjoy the benefits it offers. Funding is bonds or even loans designed to invest in sustainable transition or green projects that help our planet.
The importance of sustainable financing.
Such projects are usually very useful for reasons that are really important today. This particular one was born to serve a different type of market: those people who want a healthier world. These people (and there are more and more of them) want to support businesses and companies that are committed to making the world a better place. Sustainable finance is a project that can radically change the way we think and do business. In addition to gradually improving our environment and quality of life.