Sustainability is a pressing issue that affects us all, and it’s essential that we take action to address it.
Your finances are a great place to start from, because choices you make about your money can have a big impact, both individually and collectively
In this series, we’ll be sharing some practical tips and strategies that you can use to make a positive impact on the world around you through your financial choices, while making good returns.
So, let’s get started. When we talk about sustainability in finance, we mean making choices about where your money is placed and what it supports.
It’s important to remember that your money doesn’t sit in the bank.
It’s out there doing stuff – and that’s how banks make money. Where it’s used can make a real difference, for example by investing in renewable energy, infrastructure projects, community development or sustainable innovation.
And that’s where your financial choices come in. By making sustainable choices, you can make a positive impact on the world around you.
In finance, we often hear the term ESG in the context of sustainable products. Sustainable finance refers to the process of taking environmental, social and governance – or ESG for short – considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects.
Sustainable finance covers a broad spectrum of activities for example sustainable funds, green bonds, impact or ESG investing, microfinance, active ownership, credits for sustainable projects and development of the whole financial system in a more sustainable way. These activities are led by agents like banks or governments and can be participated in by corporates or individuals.
In this blog series we’ll focus on products available to individuals, or retail products, so that hopefully you will take away a few key learnings and be inspired to make the switch for good.
We’ll also discuss greenwashing, which is when companies make false or misleading claims about their sustainability credentials and how to watch out for tale-telling signs
By the end of this series, you’ll walk away with the confidence to know that by making sustainable choices with your finances, you can make a positive impact on the world around you.
We all have a role to play in support sustainable development and the fight against climate change.
What do we mean by sustainability in finance
Sustainable finance is defined as investment decisions that takes into account the environmental, social, and governance (ESG) factors of an economic activity or project.
However, the money you hold in your account isn’t just sat in a vault. Your bank uses it to make loans, fund projects, and support companies. And where that money is used makes a difference.
You can have a say what your money supports.
By choosing to invest in companies that prioritize sustainability or by banking with institutions that support environmentally-friendly initiatives, you can make a positive impact on the fight against climate change.
For example, this is the message of empowerment behind campaigns like Make My Money Matter, that shine a light on how finance must become a force for good: it’s about recognising that we have the power to make a difference with our financial choices and taking action accordingly.
According to research carried out by Make My Money Matter, switching your pension to a green option is 21x more effective at reducing your carbon footprint than giving up flying, going veggie and switching energy provider combined.
That’s because pension funds invest money on our behalf, often into companies that do harm, supply chains that are unsustainable, and industries that accelerate climate change.
When people find out they’re accidental investors in these companies, they’re often horrified to know where their money is actually going. It’s undermining the day-to-day choices and contradicting their values, so vegans may be investing in the meat industry, medics in tobacco, and climate activists in fossil fuel companies.
In the next blog we’ll explore key concepts in sustainable finance, such as ESG, adaptation finance and impact investing.