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Should my Business be involved in Green Finance?

by DrPrem Jagyasi

The amount of businesses becoming involved in green finance is rapidly increasing – 2014 saw climate-friendly investments surge to $391 billion; an increase of 18% compared to the previous year. Furthermore, natural capital has declined in 116/140 countries as a direct result of human pressure placed on Earth’s resources and approximately 4 million people die prematurely every year due to air pollution exposure. However, deciding whether to invest in green finance can be a difficult decision. With this in mind, here are reasons as to how green finance could benefit your business.

 A Global Understanding: 

G20 

Team having a meeting about recycling policy

The necessity of a greener future has never been greater – a need that has been recognised by some of the world’s leading countries. Recently, G20 (an assembly of the governments and leaders from twenty of the world’s largest economies), has expressed their support for a wave of green finance reforms designed to mobilise crucial investments towards achieving an“affordable, reliable, sustainable and low greenhouse gas emissions energy future”. G20 also reaffirmed, “the importance of energy collaboration towards a cleaner energy future and sustainable energy security”. 

London 

In September this year, the City of London launched The Green Finance Initiative (GFI) – a proposal aimed at making London recognised as a world leader in green finance.  Sir Roger Gifford, chair of the GFI said: “As the UN Environment Programme put it so clearly, the financial system we need is one that fully supports and facilitates the transition toward a low-carbon economy, and we believe London can play a leading role in this process.” 

The report depicts the actions London has taken over the past 15 years to incorporate environmental factors into the financial sector and argues the UK has become a model of innovation in sustainable finance. Nick Robins, co-director of UNEP Inquiry and co-author of the report stated: “It is striking just how many key global initiatives are clustered in London – whether on responsible investment, green bonds, unburnable carbon, sustainable banking, climate disclosure or insurance risk”. 

What are the Benefits? 

A Stronger Reputation

Nowadays, it is becoming more vital that businesses show an interest in the sustainability of the environment, both for profitability and reputation. A global survey identified 53% of consumers would prefer to buy products and services from companies with environmental dedication; meaning running an unsustainable business could be the difference between a profit and a loss. Green finance will provide your business with the recognition required to build a reputation as environmentally friendly.

Profitability

 profitability

Improving profits is a fundamental goal for a significant majority of businesses. Recently, the Bank of England Governor Mark Carney expressed his support for green finance, explaining how the long-term financing of green projects in flourishing markets would promote financial stability – “Green finance is a major opportunity. By ensuring that capital flows finance long-term projects in countries where growth is most carbon intensive, financial stability can be promoted”.According to Carney, the issuance of bonds to finance water or renewable power to reduce carbon emissions could double in 2016 from last year’s $42 billion.

Carney continued, depicting: “The development of this new global asset class is an opportunity to advance a low carbon future while raising global investment and spurring growth”. 

Growth Opportunities 

Green finance could facilitate the growth of high-potential green industries, promote technological innovation and create business opportunities, for example – renewables represented approximately 62.5% of net additions to global power capacity in 2015, with the market size for electric vehicles expanding in 2014. Clean technology, energy saving and environmental remediation sectors tend to be high-tech and affiliated with high research and development spend to spur technological progress.

The development of green financial institutes, such as green bonds, green loans and green investment trusts also provide business opportunities for many financial firms. Overall, providing finance for green sectors with high market potential could lead to business growth.Neil Wilson, Markets Analyst at ETX Capital believes: “The transition to a more sustainable global economy will be the most capital intensive movement in history so far”.

Environmental Benefits 

flagships-of-sustainability

Ultimately, the goal of green finance is to reduce environmental impact and increase sustainability; this includes – reduction in air, land and water pollution and decreased levels of greenhouse gas emissions. It will also assist with the utilisation of natural resources and the mitigation and adaptation of climate change. Additionally, green finance will alter environmental risk perceptions to improve environmental friendly investments and reduce those inflicting harm.

Suitability for all Institutions

Green finance is adaptable for all businesses. For example – Banks and investors could improve the greenness of their operations through specific financial products, instruments and asset classes, such as labelled green loans/bonds and designated green infrastructure funds. Also, green finance is suitable for both public and private institutions, in fact – 2014 sawprivate investments amount to $243 billion (62%) of the global climate finance; with public finance (mostly grants and loans) reaching $148 billion. It is estimated in China that over 85% of the country’s future green investments will be financed by private capital.

Article Submitted By Community Writer