IGSF

WHY SUSTAINABLE FINANCE ?

FINANCIAL AND EXTRA-FINANCIAL STANDARDS

Finance is at the heart of today's economies and governance systems worldwide. It drives structural changes on the society and is a divisive topic of debate. Some views assert that finance promotes development and contributes to societal progress, while others argue that it causes environmental harm and widens disparities. The importance of reconciling finance with environmental, social, and ethical values responds to strategic challenges in terms of competitiveness, sustainability, and, most importantly, the general interest. Nowadays, non-financial data holds equal importance to financial data and guides decision-making. Consequently, the global ecosystem supports the idea of measuring overall corporate performance, encompassing both financial and non-financial aspects, with a focus on sustainable growth.

CHALLENGES

The sustainable finance places a strong emphasis on environmental, ethical, and social considerations. It aims to adopt a governance model that better integrates these considerations into daily management decisions. This approach addresses several key challenges:

RISK REDUCTION

Mitigating risk factors related to controversial business practices, degradation of human settlement areas, inherent impacts on human health, or anticipation of environmental and climate disruptions, etc. By incorporating suitable solutions and criteria, companies and their stakeholders can better assess and manage these risks.

EFFECTIVE TARGETED COMMUNICATION

Addressing the concerns of stakeholders, including consumers, employees, shareholders, investors, and regulators, who are interested in environmental and social issues, as well as good governance practices in general. In response to this, companies are adapting and adopting governance systems capable of better integrating sustainable practices. This requires developing new interactions and models to achieve this, and stakeholders want to contribute to these concerns and ensure that targeted companies align with their values.

CONVERGING TOWARDS SUSTAINABLE AND COLLECTIVE EFFICIENCY

Contributing to the global Sustainable Development Goals (SDGs) defined by the United Nations. This involves integrating into management a set of concerns defined by the 17 SDGs, which are essential elements for providing concrete responses to present and future global challenges such as climate change, water, biodiversity, poverty, and inequalities.

OPTIMIZING ECONOMIC AND SOCIO-ENVIRONMENTAL PERFORMANCES

Continuously working to improve the socio-environmental performance of products and services throughout their life cycles, from manufacturing to disposal. This evolution of processes through strong commitments has several virtues and can foster a conducive environment for innovation and development. In this regard, numerous studies demonstrate that companies that integrate sustainable practices into their business models tend to outperform their peers in the long term. Financial actors are changing their financing policies in search of companies that integrate CSR practices most effectively. The vast majority of financial actors are integrating sustainable finance at the core of their strategies and aim to support, through their financial investments, central challenges: energy transition, the development of emerging economies, social inclusion, and intelligent use of scarce resources, in order to build a better future.

SUSTAINABLE IMPACT

KEY SUCCESS FACTORS

The effectiveness and impact of sustainable finance relies on several factors :

RELIABLE, AVAILABLE, AND OF QUALITY NON-FINANCIAL INFORMATION

Access to reliable information regarding environmental, ethical, and social performance that correlate with financial performance enables well-informed decisions. Regulators and standard-setting bodies are working, either independently or collaboratively, to develop disclosure standards and frameworks to enhance transparency. Sustainable finance requires the full integration of ESG criteria into production processes, business models, and development, throughout a company's life cycle.

ALIGNMENT OF OBJECTIVES

The effectiveness of sustainable finance depends on how it incorporates ESG criteria, utilizes appropriate financial products and data, encourages shareholder engagement, and measures real impact on CSR issues. Its aim is to align long-term financial objectives with environmental and social goals, thus creating a sustainable approach. The relevance of sustainable finance lies in its ability to contribute to global goals, mitigate planetary risks, meet societal expectations, while generating sustainable returns, and enabling investors to make value-aligned decisions. Sustainable finance plays a significant role in promoting a more environmentally, socially, and ethically responsible economy.