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Sustainable finance

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Sustainable finance is the set of practices, standards, norms, regulations and products that pursue financial returns alongside environmental and/or social objectives. It is sometimes used interchangeably with Environmental, Social & Governance (ESG) investing. However, many distinguish between ESG integration for better risk-adjusted returns and a broader field of sustainable finance that also includes impact investing, social finance and ethical investing.[1]

A key idea is that sustainable finance allows the financial system to connect with the economy and its populations by financing its agents in seeking a growth objective. The long-standing concept was promoted with the adoption of the Paris Climate Agreement, which stipulates that parties must make "finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development."[2] In addition, sustainable finance has a key role to play in the European Green Deal and in other EU International agreements, and its popularity continues to grow in financial markets.[3]

In 2015, the United Nations adopted the 2030 Agenda to steer the transition towards a sustainable and inclusive economy. This commitment involves 193 member states and comprises 17 goals and 169 targets. The SDGs aim to tackle current global challenges, including protecting the planet. Sustainable finance has become a key cornerstone for the achievement of these goals.[4]

Various government programs and incentives support green and sustainable initiatives. For instance, the U.S. Environmental Protection Agency (EPA) provides grants and low-interest loans through its Clean Water State Revolving Fund for projects that improve water quality or address water infrastructure needs. The Small Business Administration (SBA) also offers loans and grants for green businesses. Research and utilize these programs to secure necessary financing.[5]

  1. ^ Hardyment, R (2024). Measuring Good Business: Making Sense of Environmental, Social and Governance (ESG) Data. Taylor & Francis. ISBN 9781032601199.
  2. ^ "Paris Agreement" (PDF). United Nations Framework Convention on Climate Change. 2015. Archived (PDF) from the original on 2021-10-19. Retrieved 2021-10-16.
  3. ^ Global Sustainable Investment Alliance (GSIA) (November 2023). "Global Sustainable Investment Review 2022" (PDF). GSIA. Archived (PDF) from the original on 13 May 2024. Retrieved 19 April 2024.
  4. ^ "Overview of sustainable finance". European Commission. Archived from the original on 2020-11-05. Retrieved 2022-05-27.
  5. ^ Vkrs, Patel029 (June 17, 2024). "7 Top Strategies to Secure Green Business Financing in 2024". KeepFinancio. Retrieved June 17, 2024.{{cite web}}: CS1 maint: numeric names: authors list (link)

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