Powering progress: Financing Africa's electrification
19 June 2024
How to leverage innovative financing and regional power markets to achieve universal electrification in Africa.
30 min podcast
Sustainable finance
Discover the power of sustainable finance and learn how it can align your investments with your values. Start investing in a way that reflects your commitment to a more sustainable future.
Sustainable finance represents the dynamic intersection of finance and sustainability, aiming to reshape financial systems towards a more equitable and environmentally responsible future.
What is sustainable finance?
Sustainable finance plays a crucial role in directing capital flows towards investments that have a positive impact on the environment and society. By integrating environmental, social, and governance (ESG) considerations into investment decisions, sustainable finance aims to align capital with sustainable development goals. This involves assessing the environmental and social implications of investment projects alongside their financial viability. By directing capital towards sustainable initiatives, such as renewable energy projects, social impact initiatives, and sustainable businesses, sustainable finance helps drive positive change and contributes to a more sustainable future. It enables investors to not only generate financial returns but also make a meaningful difference by supporting projects that have a positive impact on the community and the environment.
Why is sustainable finance important?
Environmental protection and risk management
Sustainable finance provides financing to help combat climate change and environmental degradation. It also identifies and manages long-term risks such as regulatory changes, reputation damage, increased costs, and compliance issues, ensuring financial stability and resilience.
Find out about our commitment to the environment here.
Stronger financial returns and portfolio diversification
Sustainable investing can lead to strong, resilient financial returns that are likely to scale as the world moves towards decarbonisation. By incorporating ESG factors, you can achieve comparable or better financial performance compared to traditional investments, reducing portfolio risk and enhancing overall returns.
Social impact and community development
Impact investing is a subset of sustainable finance. It focuses on investing in companies, organisations, or projects with the intention of generating measurable, positive social or environmental impact alongside financial returns. Impact investors actively seek investments that align with their values, generate both financial and societal benefits and targeting specific social or environmental challenges.
What are sustainable finance approaches?
Sustainable finance encompasses various approaches to integrate ESG factors into financial decision-making and investment processes. Here are some of the most common sustainable finance approaches:
- ESG Investing: ESG factors are considered alongside traditional financial analysis in investment decisions. This approach acknowledges that integrating ESG principles can have a significant impact on a company's performance and risk profile. For instance, companies with strong environmental practices are better positioned to navigate regulatory changes and resource scarcity, while those with robust governance structures tend to exhibit greater stability and transparency.
- Impact Investing: Involves making investments with the intention of generating positive social or environmental impact alongside financial returns, often targeting specific social or environmental goals and addressing global challenges. Impact investors actively seek investments that align with their values.
- Green Financing or investing in projects that have environmental benefits, such as renewable energy, energy efficiency, green bonds, and sustainable infrastructure.
- Transition finance: Financial activities that support the transition of companies, industries, and projects towards more sustainable and low-carbon practices. It involves providing financial resources, expertise, and support to facilitate the shift from high-carbon or unsustainable activities to more environmentally friendly alternatives. Transition finance recognises that certain sectors and industries may have a significant carbon footprint or environmental impact, and aims to enable their gradual transformation. The goal is to help these entities reduce their environmental impact, improve their sustainability performance, and align with global climate and sustainability goals. Transition finance can include various financial instruments, such as loans, bonds, and investments, specifically designed to support the transition to a more sustainable economy.
Sustainable finance is about aligning your money with your values to foster sustainability.
How is green finance different to sustainable finance?
Green finance focuses on investments specifically aimed at environmental benefits, like renewable energy, energy efficiency, access to clean water and pollution reduction. Sustainable finance includes green finance but also integrates broader environmental, social, and governance (ESG) factors, addressing a wider range of sustainability issues such as social equity and corporate governance.
Our approach to responsible investing
As custodians of your wealth, we recognise the importance of responsible investing and sustainability. We're committed to aligning our investments with long-term sustainability, considering traditional risks alongside ESG issues.
By incorporating ESG factors into our analysis, we can allocate capital more effectively, leading to improved returns. Our Research Team uses Sustainalytics, a global leader in ESG research, to strengthen our approach. We prioritise stewardship, voting, and active engagement to uphold our fiduciary responsibility and maximise value for our clients.
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