Sustainability is a business approach to creating long-term value by taking into consideration how a given organization operates in the ecological, social and economic environment.

“Companies that are breaking the mold are moving beyond corporate social responsibility to social innovation. These companies are the vanguard of the new paradigm. They view community needs as opportunities to develop ideas and demonstrate business technologies, to find and serve new markets, and to solve longstanding business problems.”Rosabeth Moss Kanter, Harvard Business Review.

Sustainability is a business approach to creating long-term value by taking into consideration how a given organization operates in the ecological, social and economic environment. Sustainability is built on the assumption that developing such strategies foster company longevity. As the expectations on corporate responsibility increase, and as transparency becomes more prevalent, companies are recognizing the need to act on sustainability.

Sustainability is becoming more important for all companies, across all industries, quick wins for DE-Carbonization – at least within current frameworks – have already been put in place. Innovative finance will be needed to unlock investment across all sectors and industries. Environmental Finance explores how investors can enter uncharted waters to truly drive change.

According to Kirsten Dunlop, CEO of EIT Climate-KIC Sustainability in his speech at “Mission Finance Climate Innovation Summit in Dublin – Nov 2018 says: “Innovative financial solutions and partnerships will be key to making this happen. Many of the “quick wins” have arguably already taken place, with most industries having undertaken the DE-Carbonization efforts easily available to them within current market structures. The energy sector is rapidly transitioning to low-carbon alternatives, but other crucial parts of a DE-carbonized economy have proven more difficult to finance, such as energy efficiency retrofits, agriculture, sustainable land-use and cities”.

There are also investment implications of achieving a net-zero emissions economy by focusing on sustainable finance solutions that is more challenging part. With more innovative investments to take place and for climate change to be mainstreamed into the financial system.

The rewards of financing energy efficiency retrofits could be huge but deployment is slow. Buildings are responsible for 36% of CO2 emissions in the EU but the annual energy saving renovation rate is only between 0.4-1.2% in member states, according to the European Commission.

These are an example of industry Leaders that have made strong commitments move to sustainability and They are embarking on a more sustainable journey:

1. Adidas
2. Nike
3. Nestle
4. Walmart
5. Coca-cola
6. Pepsi
7. H&M
8. BMW
9. Toyota
10. Biogen

Innovative green-technology SMEs as an opportunity to promote financial DE-Risking

Green business practices are capable of more than generating positive public sentiment. By incorporating sustainability into decision-making, organizations have the opportunity to make not only a positive impact on the environment but also turn a profit.

A Study conducted by NYU Stern Center for Sustainable Business found that implementing sustainable practices often increased financial performance. Additionally, in 58% of their studies, there was a positive correlation between ESG (environmental, social and corporate governance) and financial performance. Current trends indicate that the financial services industry has the opportunity to both influence and benefit from implementing green-oriented initiatives.

Going green is gradually becoming a core part of many business strategies. Compared to 37% in 2019, a 2020 EY report found that 52% of banks view environmental and climate change as an emerging risk over the next five years.

There are 2 Gaps when addressing the sustainability that we should be aware :

1. Doing Gap (Bridging the Transparency Gap)-The existing transparency gap is distorting market risk assessment, slowing progress on the low-carbon transition, and leaving All the globe’s economy vulnerable to impacts. More than 50 interviews in Canada, experts echo that a lack of transparency is distorting economic activity away from the best available solutions for climate change. Across dozens of interviews, experts echo that a lack of transparency is distorting economic activity away from the best available solutions for climate change.  The private sector is the best source of industry and market insight in scoping this issue by having sustainability incorporated in the business model and the path towards a thriving low-emissions, climate-resilient economy.
2. Competitive Advantage Gap-Competitive advantages depend on a firm’s capabilities in building, re configuring and integrating proficiency to better adapt to the changing business environment. More companies are seeing sustainability as an area of competitive advantage. For instance, firms are more interested in intensely green governance information mining and creating a socially responsible image for a high shareholding percentage because investors are displaying stronger information mining ability. In practice, firms’ strategic responses are only exhibited in marketplaces in which competitive activities are substitutes because deterrence is costly such that investments are impossible when avoiding market opponents, and obligatory firms react to potential compliant competitors. Prior studies on SCF have not yet explicitly considered the interactions between firms’ financing and investment decisions because these issues are interrelated to firms’ competitive environments and organizational structures (Arseculeratne and Yazdanifard 2013; Gómez-Bezares et al. 2016; Sertsios 2020). Sustainable investment, investors and third-party supply chains regarding firms’ environmental and social performance as important investment criteria should receive greater concern (Li et al. 2020). Customer appreciation for sustainable marketing practices to improve firms’ competitive advantages cannot be ignored (Arseculeratne and Yazdanifard 2013). Sustainable technologies and strategies also help move the marketplace on the right track as costs are driven downwards (Siegrist et al. 2020). A nuanced understanding of stakeholders’ demands, cooperation, willingness to enhance growth prospects and competitiveness is necessary (Gómez-Bezares et al. 2016). The firm’s selection related to adopting a sustainable business model for long-term planning to reinforce resilience, increase sales, reduce risk, create a corporate culture and improve brand value also needs to receive greater focus (Ketata et al. 2015).

Innovative green finance/Indeed many firms now engaged in commercializing solutions to climate change must seek out markets where they can both improve environmental performance and do so at a cost lower than current business baselines. This is because today inefficient fossil fuel subsidies, combined with very low carbon prices, create disincentives to quickly adopt green innovation. we should focus here on the key challenges for, and role of, innovative, low-carbon SMEs. Note also that SMEs wanting to reduce GHG emissions from their own operations must simultaneously open both the innovation and financing windows. Access to finance is as important as access to technology when it comes to improving Eco-efficiency. We should also focus specifically on access to finance to adopt innovation.

While carbon pricing and sustainable infrastructure are key to fostering the innovation process, accessing green finance will be a significant challenge for firms developing and commercializing innovative solutions to climate change as well as SMEs who must adapt to climate change.

Integrated, system- level approaches should underpin all efforts to catalysis investment in complex areas of the shift towards a zero-carbon world. A step toward ECO Finance Innovation Solution Strategies.

Successful engagement of your engagement in climate action and sustainability activities can be challenging, but there are ways to overcome the barriers.

Financial Institutions Can Influence Green Adoption

As the world works toward recovering from the impact of the corona-virus pandemic, environmental and sustainability advocates are hopeful that this will be the opportunity to transition to clean energy. Companies have the chance to emerge even stronger and more resilient. In recent years, lenders, banks and investors have realized that climate change extends beyond the climate crises.

Supporting Green Opportunities Can Accelerate Recovery

Initiatives range from green bonds and large-scale industrial investments that target climate change to small personal loans that encourage consumers to buy more Eco-friendly products. Promote a reporting system to help monitor the scale-up of green-technology SMEs that lead to reduced GHG emissions, and their commitment to market or adopt low-carbon technologies, processes or business models.

Top investment and financial services companies are taking steps to help their clients. JPMorgan aims to provide financial services for up to $2.5 trillion for companies and projects targeting climate change and social inequality. Goldman Sachs created a $750 billion fund for investing, advisory and financing activities to aid their clients in their climate action and inclusive growth efforts.

Include green-technology firms in green finance platforms

This platform will includes SMEs in green finance platforms, and ensuring that they report on climate impact, will provide a powerful investment signal because it will ensure that investors are able to identify innovative green-technology firms. his platform should be chaired by finance ministries/central banks and involve all relevant stakeholders, including regulators, academia, finance, industry (including SMEs) and relevant international institutions.

Align Sustainability Strategies Embedded in Business Model

Management needs to make sure that the strategy of the company and the sustainability efforts are aligned. Taking an example Toyota is well known for innovation in hybrid engines, but less so for reducing their dependence of rare earth minerals. These minerals were required for hybrid and electric engines. But by developing alternative motor technologies Toyota reduced its import dependence and operational risk, and in doing so reduced its financial risks in case of price increases.

Compliance

Companies need to address compliance, which often relates to regulations in waste management, pollution and energy efficiency as well as human rights and labor responsibility. Compliance is also an issue that concerns investors.

Quantify

All companies struggle with quantifying the return on their sustainability investments. With regards to compliance this is a straight forward issue. However, Companies need to link sustainability to a business model.

Transparency

The only way for companies to accomplish transparency is through open communications with all key stakeholders built on high levels of information disclosure, clarity, and accuracy – as well as an openness to recognizing faults and improving practices.

In Conclusion, sustainability is a major challenge, one that matters beyond individual companies. Naturally, as a global financial intermediary, we have a role to play here, by developing investment products and financing solutions and by providing advice to companies on how they can make the transition to more sustainable business models. The coordination power of companies and countries are critical to the path towards a sustainable global financial system, by connecting and empowering a diverse array of stakeholders, organizing local forces, while disseminating basic standards.

To increase green investments and align financial markets with sustainable development, we should:

1) promote the standardization of green finance practices,

2) enhance the transparency of information by promoting disclosure standards for carbon and environmental risks;

3) support market development for green investments at a global level; and

4) support developing countries in developing and implementing national sustainable finance road maps.