It seems like the term “green” can be applied to just about everything these days— “green architecture,” “green energy,” etc.—and one term that seems to be trending more and more is “green finance” (or “sustainable finance”). Green or sustainable finance is fairly new, but the term essentially refers to financial investments and initiatives that are environmentally motivated, as defined by the German Development Institute.
Recently, the European Union (EU) held a Sustainable Finance Conference in Brussels, to talk about the role green finance will play in future EU budgets and discussions. As a press release from the European Commission states, the conference was also meant to cover guidelines, corporate reporting and transparency within the EU, regarding green finance. Ultimately, the conference created a “shared vision” of sustainable finance for the EU, and situated green finance as a top priority for the EU and international markets.
Even if you’re ambivalent about sustainable finance, it could still affect business and finance on any level. In London, the current leading city in green finance, the stock exchange boasts 59 green bonds, and those bonds have seen significant growth, according to Forbes.
It’s a growing market, and leaders are proposing ways to extend that growth, including, as The Economist says, “loosen[ing] capital requirements for banks’ green investments. That goes against a decade’s worth of financial regulation, which has sought to bolster banks’ capital buffers.” Whether or not sustainable investments are deregulated, they will still be prioritized higher than before, since environmental efforts will compose the EU’s budget on a much larger scope in the next decade—up to one fifth.
You may be wondering how that has anything to do with the American market. Even though the United States has withdrawn from the Paris Agreement, the proceedings from the EU conference still affect American finances and businesses. Michael Bloomberg, an American attendee who spoke at the Brussels conference, argued that even if the sustainable finance movement isn’t taking place on a national level, “the US decision to withdraw from the Paris Agreement has galvanized US cities to take action” (as quoted in Euractiv). There’s a growing interest in green finance worldwide, among businesses and cities, whether or not their national governments are involved.
In the States, municipal- and state-issued climate bonds are steadily growing. “State-level climate action is significantly bolstering the country’s green marketplace even amid uncertainty at the federal level” says Michael Ferguson for Business Green. Furthermore, decarbonization is still ongoing at state and municipal levels, with solar and wind energy projects gaining momentum, and green asset tax credits are still available to corporations.
To stay current with green finance trends, companies need to find ways participate in this growing market. That may entail funding climate-related projects like solar and wind energy, installing and financing LED upgrades, or investing in a climate-related municipal or state bonds.