Following the concept coined by the European Commission, sustainable finance refers to the "financing of investments taking into account environmental, social and governance matters".
There is also talk of green and social financing, which refers to those financial products or services aimed at facilitating the financing of business projects dedicated to combating climate change with better management of natural resources and promoting economic models consistent with human rights and justice; in short, with sustainable development.
The main objectives of this type of funding include the following:
- decrease environmental pressures
- reduce greenhouse gases and pollutants
- and optimise waste management, as well as improve efficiency in the use of natural resources
At the same time, sustainable finance is considered to include awareness raising and transparency in terms of:
- sustainability risks in the financial system itself
- use of the network of supervisors and central banks for the management of good governance policies
Sustainable finance is based on the consideration of environmental and social issues in long-term business decisions. Environmental matters relate to climate change adaptation and mitigation, as well as environmental protection. Social issues are related to inequality and investment in human capital. With regard to these two areas, governance plays a decisive role in ensuring that they are effectively taken into account in decision-making processes and in the company's strategy.
Since the end of 2015, there has been a clear cultural change that demands the integration of sustainable finance into current financial systems and economic growth models.