Is Sustainable Finance revolutionizing the future of investing?
2 min read
Sustainable finance involves making investment decisions that consider not only financial returns but also Environmental, Social, and Governance (ESG) factors.
According to a report by the Global Sustainable Investment Alliance, as of 2019, more than $31T of funds is held in sustainable or green investments and is ceaselessly growing. In India, the concept is yet nascent. India has fewer funds focused on ESG issues than other top 10 economies. Indian investors are reluctant to put cash into ESG funds as most funds in this sector are new and could not show a track record of outperformance. As per the latest available data, India has 23 ESG funds, compared to the US and Britain with more than 500 each.
As investors broaden their definition of ROI, companies should look to prove more than just their revenue trajectories. Startup pitch decks should include slides to prove their net-positive social and ecological effects. Going forward, companies obeying ESG norms and tracking metrics like Climate Transition Scores, Environmental & Social Scores, ESG Disclosure Scores, etc. will be rewarded by all the stakeholders.
Companies following ESG practices tend to create a win-win situation for all. They exhibit better operational performance, less investment risk, higher resilience, and finally better stock performance. There are already multiple Indian startups like Oorjan, Log 9, OxyGarden, etc. working in this space to make India self-reliant and sustainable. To help facilitate the development of sustainable finance, in 2016, the world’s first dedicated green stock exchange, Luxembourg Green Exchange was launched. It operates as a dedicated platform for green, social, and sustainable securities.
Do you think there is an unprecedented opportunity to apply sustainable finance to make a global impact?
