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The next big thing: Green Finance

  • Publish Date: Posted about 2 months ago
  • Author:by MERJE

​As World Environment Day takes place on June 5 and we all join the fight against global warming and CO2 emissions, green and sustainable issues are quickly reaching critical mass for Financial Services organisations.

Sustainability is now, more than ever, a priority for business leaders which needs to extend beyond the more traditional scope of achieving strategic profit-making targets.

In today’s climate, it must transcend to non-commercial objectives, as businesses increasingly report on Environmental, Social, and Corporate Governance (ESG).

ESG refers to the central factors which measure the sustainability and societal impact of an investment into a company or business.

Traditionally, the term ESG brings to mind environmental issues like climate change and resource scarcity. Indeed, they do form a vital function of ESG, but the concept encompasses so much more than that alone.

For example, it covers social issues like a company’s labour practices, talent management, service delivery, product safety and data security. It also addresses governance matters like board diversity, inclusion, executive pay and business ethics.

During the course of the pandemic, ESG practices have provided a pathway for organisations to navigate, adapt and emerge with their businesses intact, while providing hope for future generations.

Green finance, particularly in the context of ESG, is now firmly on the radar of Financial Services and FinTech firms, and has rapidly become an area of heightened focus.

The good news is that a number of the larger Financial Services institutions have already made their first forays into green finance and are now ramping up the gears.

Earlier this year, banking giant Credit Suisse expanded its ESG team in a bid to drive integration across the bank and fuel the Swiss lender's ambition to be a leader in sustainability.

App-based Tandem Bank confirmed in 2020 that it had raised £60 million through investors and had bought a ‘green lender’ which helps consumers to buy solar panels for their homes.

This year, digital challenger Starling Bank launched debit cards made from recycled plastic here in the UK. In 2020, they confirmed that they don’t invest in fossil fuels, coal power, energy companies, mining or arctic drilling.

Spending tool Tred also offers green debit cards made from recycled marine plastics to offset their carbon footprint, after securing over £500,000 of funding on Crowdcube.

Innovative app Clim8 provides customers with a simple way to invest in a sustainable portfolio of carefully selected companies which are already making a positive impact on climate change.

What’s clear is that this movement is paving the way for SMEs and start-ups to scale operations accordingly and follow suit. This came after LSE adviser finnCap launched a scoping handbook and toolkit informing small cap firms as to how they can improve their ESG credentials.

In turn, consumers, especially those inhabiting the younger generations, are making more considered choices about their Financial Services providers, favouring those that follow sustainable and ethical practices. For example, millennials are nearly twice more likely to invest in companies or funds that target specific social or environmental outcomes.

What all of this proves is that people are becoming more mindful about the people and environment which surround us. This is why the implementation of ESG policies is essential for helping to establish the future financial performance of companies as we try to heal and recover in the current climate and beyond.

If you would like to discuss this or any other topics covered in our articles, please get in touch: info@merje.com.