Sustainability in finance is a crucial component to have, as the financial sector wields enormous power in decision-making and paving the future of this planet. Sustainable finance is defined as integrating environmental, social, and governance (ESG) issues into everyday financial decisions whether it be large or small.
Understanding sustainable finance is important so that you can know what practices to look for when looking to add stocks to your investment portfolio, or when looking for a new job at a new company. Ensuring that you are supporting the right organizations and corporations will come much easier once you know all there is to know about sustainable finance.
This post explores multiple examples of sustainable finance, the reasons it has grown in popularity over the last few years, and why you should consider sustainable finance solutions.
Sustainable Finance Investment Firms
There are many investment firms that focus solely on ESG solutions and investments. In recent years many of these firms have begun to see returns higher than that of the average return in the stock market.
This Hong Kong-based firm, for example, focuses on just that by investing in sustainable solutions as well as impactful ones.
Due to more and more sustainable finance investment firms popping up and investing large swaths of capital into sustainable solutions, investing in ESG is becoming a smart decision financially.
Next up, we’ll go over some reasons why sustainable finance has grown in popularity over the past few years.
Why is sustainable finance so popular now?
For starters, there has been an all-around increasing awareness of climate change and the impact humans can have on our environment. This has prompted a lot of powerful individuals and corporations to start really thinking about the impact they have on the world, and how they should be investing.
In addition to investors gaining awareness and starting to lean toward environmentally friendly and sustainable companies to invest in, the government has also made the process easier by introducing a legal framework to incentivize investments in ESG solutions.
One example of a government passing laws to make investing in these forms of companies easier is the EU Emissions Trading System, which places a cap on the amount of CO2 companies are allowed to emit before paying fines. It has led companies to start implementing sustainable practices and move to be carbon neutral. To learn more about the EU Emissions Trading System, check out their website here.
Why you should choose sustainable finance
The impact sustainability has on your own finances is very close to zero, and choosing to make your portfolio composed of 100% ESG compliant companies is no longer the risky investment it once was.
However, you also don’t need to put 100% of your portfolio in sustainable solutions to practice sustainable finance. Just being conscious of the impact you have on the world when making financial decisions is a great step in the right direction.
Some stocks of companies that have committed to ESG and sustainability are Microsoft, Tesla, Nvidia, Apple, Adobe, Best Buy, among so many others. You may be surprised to see so many big names on the list. But as governments push companies to become more ESG compliant, sustainable finance will become the norm.
If you want to make your portfolio completely ESG friendly and 100% sustainable, then we highly recommend it. The number of companies that fit that criteria are growing daily.