Sustainable Finance: How can finance help the environment ?

We are all aware of climate change and the emergency it presents, but we need to understand more about the role of finance in this process. That’s why we asked our expert, Marianne Haahr, to share her insights into this topic. Let’s dive in!

According to the report published by Climate Nonprofit CDP in April 2021, the finance sector funds 700 times greater carbon emissions through their financial actions (e.g. lending, investing, assets managing) than they produce directly by using and maintaining their facilities.

As disturbing as it sounds, unfortunately statistics like this are not very surprising. The overwhelming majority of companies were not born green, but with their main objective of ‘making money’. The huge carbon impact of this sector presents the urgent need for a change in the way we do finance.

So what exactly can finance do to help the environment?

We asked our expert, Marianne Haahr – the Green finance lead at Global Canopy and the Secreteriat of the Task Force for Nature Related Financial Disclosures (TNFD). Here are the key highlights:

1. Green Incentives

There is already a significant number of more sustainable solutions that can be used to decrease carbon emissions. But we need finance to make those solutions more attractive, not only to big companies, but also to retail investors.

2. Smart Financial Instruments – Green bonds

Issuing green bonds is a great way for corporations to become more energy efficient and carbon neutral. The market for green bonds has grown by 50% globally between 2015 and 2020, which promisingly shows that there is both the demand and supply in place for this type of initiative.

3. Transparent business model

In order for people to make informed decisions, there needs to be transparency provided by companies. This will allow everyone to invest their money in the businesses that cherish the same values as they do. While being positive for the environment, it could also benefit the investors in the future, e.g. through pension funds.

There were many more aspects discussed in our interview, such as the difference between Fintech companies that were born green and those that became green, or some exciting perspectives for the ‘greener’ future and the role that Fintech might play in it.

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