Sustainable finance trends, innovations, and prospects

Sustainable Finance Trends

According to research, the sustainable finance market equates to 5,491.84 billion USD in 2023. The financial sector holds a significant amount of power in sparking awareness and driving funding to sustainability-related issues. Sustainable finance training allows the financial sector to pave the way for the development and research of alternative energy sources and support enterprises that follow sustainable and fair labour practices. 

Sustainable investing in projects and enterprises with robust ESG practices is already on the rise, and more finance professionals are entering this growing field to have a positive impact on the world around them. Sustainable finance growth continues and with this comes emerging innovations and exciting prospects. Keep reading to discover the current hottest trends within the sustainable finance arena. 

What is sustainable finance?

Sustainable finance is essentially the process of taking environmental, social, and governance (ESG) considerations into account when making investment choices in the financial sector. By taking these considerations into account, investors may be able to ensure more long-term investments that align with their values and mission. 

Environmental considerations could include climate change adaptation and mitigation. In addition, protecting the planet in a broader sense by preventing pollution, driving the adoption of the circular economy, and preserving biodiversity. Some social considerations include issues related to inclusivity, labour relations, and inequality. Human rights issues also fall under the social considerations in sustainable finance. 

The governance pillar refers to private and public institutions, including governance of employee relations, executive remuneration, and management structures. All of these play a fundamental role in driving the inclusion of environmental and social considerations throughout the decision-making process. 

Sustainable finance trends 

Sustainable finance has steadily gained interest in the last number of years. Below are some of the leading sustainable finance trends driving sustainable economic growth. 

ESG investment

The idea of sustainability in business has transformed significantly in the past number of years as businesses feel the pressure to adapt and evolve. Green finance (GreenFi) is no longer just applicable to carbon offsetting but now includes environmental, social, and governance (ESG) projects. 

According to a survey by deVere Group, over half of investors plan to increase their ESG-orientated investments in 2024. The ESG market is predicted to grow as stakeholders start to recognise the social value and the many opportunities that come with backing sustainable projects. 

Social impact

On the topic of ESG, these projects are gaining much momentum within the business world, particularly the social pillar. The social component of ESG is expected to impact employee engagement as individuals increasingly want to work with companies dedicated to sustainability. 

Environmentally conscious workers may decide to leave their current company or reject a job offer if the social dimension of ESG is not addressed. Therefore, it is no surprise that more companies are addressing the social pillar, and sustainable finance is providing the way forward. 

Carbon trading and CO2 footprint offsetting

We desperately need to reduce CO2 emissions and achieve carbon neutrality. Businesses are under increasing pressure to make the transition from business-as-usual to net zero operations. One popular way to get a carbon credit is through harnessing the carbon trading market. Many believe this is a quick way to achieve emission reduction targets. 

Therefore, it should come as no surprise that the industry is expected to grow. Several companies across the globe are already combining carbon offsetting and credit trading to achieve their targets and incorporate their zero-carbon strategies. In fact, a portion have even managed to become climate-positive, thereby removing more carbon from the atmosphere than they emitted during their operations. 

Solar energy

The increasing global demand for energy has made renewable energy a fast-emerging sustainable finance trend. Therefore, long-term success in achieving sustainable development is directly connected to sourcing sustainable, safe energy sources, and this includes solar energy. 

Solar energy development projects are being launched worldwide, attracting investor finance rapidly as we transition to a low-carbon economy. The EU, in particular, is already financing numerous solar energy projects and adopted a solar energy strategy in 2022, guiding investors and businesses on the deployment and goals of this technology. 

The way forward – Why is financial sustainability important? 

Finance is a key lever to influence environmental outcomes. The private sector has a pivotal role to play in evolving the business-as-usual approach and supporting the transition to restoring nature. 

The finance sector is well placed to incentivise this transition by agreeing to lend to, invest in, and make sure businesses manage their nature impacts and risks. It is for these reasons that sustainable finance must continue to gain traction and remains an important piece of the puzzle in achieving our sustainable development objectives. 

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