Sustainability challenge and related SDGs
Global temperatures are rising faster than anticipated, but so is awareness about sustainability challenges. This is especially true among the younger generations such as the Millennials and the “Gen Z”. Indeed, 37% of Gen Z rank climate change as their number one personal concern . When it comes to investments, 86% of Millennial investors say they are either “somewhat” or “very” interested in sustainable investing. they are either “somewhat” or “very” interested in sustainable investing.
Everybody can act through individual and collective behaviours to achieve the UN Sustainable Development Goals (SDGs).
Besides lifestyle choices, finance represents a powerful lever for the climate transition to address SDG 7 “Clean and Affordable Energy” and SDG 13 “Climate Action”. And while many financial institutions are still at the beginning of this journey, they are increasingly offering #SustainableFinance for addressing SDG 12 “Responsible Consumption and Production”.
- 7.Affordable and Clean Energy
- 12.Responsible Consumption and Production
- 13.Climate Action
Possible solutions and their contribution to achieving the SDGs
The impact of financial institutions on the planet is embedded into all aspects of their business. They can contribute to the transition towards a lower carbon economy by financing renewable energy projects or by stopping to roll over credit to the coal industry and other major CO2 emitters.
Offering preferred mortgage rates based on specific environmental criteria can also incentivise homeowners to make more environmentally conscious choices.
Wealth management can equally have a big impact. Purchasing green bonds or aligning portfolios with a climate pledge can help reduce the overall carbon footprint.
Microfinance is another impact investment vehicle which can have a positive impact on sustainable development and communities.
#SustainableFinance is the collective term which refers to all types of financial offerings that integrate environmental or social considerations into the decision process.
Primarily related SDG Targets: 12.6; 12.8; 7.a; 13.2
Investment Rationale and Growth
The demand for more sustainable products and in particular for financial products is rising globally. This trend is being fuelled by growing awareness among consumers for sustainability topics as well as a increasing regulations on sustainability in many countries.
Activities that fall under #SustainableFinance include for example green mortgages, financing of renewable energy projects, sustainable investments funds, green bonds or microfinance. In order to stay competitive and to prepare for the future, offering sustainable financial products is becoming a must. #SustainableFinance is increasingly turning mainstream and will continue to be a driver of growth for financial institutions.