Doing business in a sustainable way has been a priority of forward-thinking companies for decades—but in the 2020s, especially for large, highly visible companies, being proactive about having a positive impact and sharing that impact with the public is now essential. Green business is good business, and in the future, financial decisions linked to sustainability goals are likely to be the new normal.
Financing that benefits the environment
The term “green finance” encompasses several forms of funding: incentives to build green; green bonds, or fixed-income financial instruments that raise money for projects to benefit the environment; and green leases, in which tenants commit to, or receive incentives to, participate in energy and water conservation, waste reduction and other sustainable actions.
According to the United Nations, green finance is a subset of sustainable finance. The latter includes social and governance aspects (of “ESG” priorities, closely related to corporate social responsibility), but green finance focuses specifically on environmental goals.
For example, through its Environmental Business Initiative, Bank of America has committed $1 trillion through 2030 to advancing goals like renewable energy; sustainable transportation, water and agriculture; and improved forestry management. Citi has also made a $1 trillion commitment to sustainable finance. Charles Schwab and Co. provides layers of guidance to its clients on getting started with ESG investing. These are just a few of the many banks, investment houses and other private and public financial institutions making green choices a priority.
However, much of the momentum powering the ESG train is the will of individual investors—our values are changing. As reported by J.P. Morgan Chase, “$500 billion flowed into ESG-integrated funds in 2021, contributing to a 55% growth in assets under management in ESG-integrated products.” Individuals increasingly want to support companies and products that have a positive impact on the world around them.
https://www.usgbc.org/articles/major-companies-use-green-financing-build-their-leed-portfolios