What is sustainable finance?

In the past, investments were evaluated based on financial measures alone. However, in today’s more consciously aware world, environmental, social, and governance (ESG) issues have become hot topics in financial investments. Although sustainable finance is an extremely broad term, it is basically any form of financial service and/or product that incorporates ESG criteria into financing, business or investment decisions. And as many of its advocates argue, sustainability and finance should go hand in hand if we’re to solve the world’s environmental and societal challenges.

There can be no doubt that Antigua offers a safe financial habitat with a stable business environment to shelter from the ‘storms’ of volatile economies elsewhere.

As both financial institutions and companies are increasingly seeking ways in which they can conduct business in an environmentally conscious manner, the sector is becoming increasingly sophisticated, with new frameworks, initiatives and financial products emerging almost every day. There is also a growing distinction between the use of risk filters, which do no harm, and impact financing or investing, which seek to actively do good. Although there have always naturally been convincing reasons for sustainable financial products, it is only recently that the economic motivation has existed. With US$465 billion of sustainable debt issued globally in 2019 up from US261.4 billion a year previously, this incredible increase of 78 percent made it a record year for sustainable finance. To say that there is potential in the sector, is putting it mildly. The International Finance Corporation (IFC) estimates that there are US$23 trillion of climate-related sustainable finance opportunities in emerging markets alone in the years leading up to 2030. And according to the World Resources Institute (WRI), 25 of the world’s largest 50 banks have made public sustainable finance commitments totalling more than US$2.5 trillion.

Sustainable finance is gaining traction as investment companies increasingly accept that adopting ESG factors doesn’t hamper returns, but in fact can deliver risk and performance benefits. The IFC analysed 656 companies and found that those with a good ESG performance outperformed others by 2.1 percent in terms of return of equity. Current world events are making us all change our priorities and look at sustainable ways we can protect our societies and environment. With financial institutions having a powerful tool to promote change, sustainable finance is something we will be hearing a lot more of in times to come.