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Introduction to Sustainable Finance: The Ultimate Guide

Creating a sustainable future requires consolidated approaches from most industries, including their financial officers.

The financial sector has significant power to raise awareness of funding and sustainability issues, whether it enables research and development of alternative energy sources or helps companies pursue fair and sustainable labor practices.

Sustainable finance is defined as investment decisions that consider the economic activity or environmental, social, and governance factors of a project.

Environmental factors include mitigating the climate crisis or using sustainable resources. Social factors include human and animal rights and a variety of labor and consumer protection practices. Governance factors refer to the management, employee relations, and compensation methods of public and private organizations.

Investment in companies and projects with sustainable ESG methods is already growing, as is the demand for financial professionals specializing in this still-growing field. Bloomberg recently reported on the trend, saying it is already one of the most sought-after sectors in Asia.

Clients feel that the talent pool is very slim, especially when looking for candidates with a proven track record and relevant ESG experience in both the public and private sectors. They understand the rarity of talent and are willing to pay for most roles.

Harvard Extension School offers a master's program in sustainability and six graduate certificates in the field. These programs aim to prepare the future workforce for a more sustainable future as climate change increasingly poses a threat to public health.

A recent UN Intergovernmental Panel on Climate Change report raises the urgent need to integrate ESG factors with other factors in investment decisions to achieve an immediate and viable impact on the environment.

Sustainable business thinking is revolutionizing modern business. At one point, people would have thought of marketing it or telling a story. Today, leaders are demonstrating that a different way of thinking about environmental and social performance can lead to changes that enhance business value while harnessing the power of a company to deliver better results for people and the planet.

If learning new sustainable business skills and competencies makes companies more successful, the same is valid for business professionals. It is probably not much more accurate than the world of accounting and finance.

For instance, accounting functions need to foster skills for collecting, managing, analyzing and reporting entirely new types of business metrics, such as greenhouse gas emissions, gender pay gap results, and ethics indicators, as well as anti-corruption indicators.

Finance functions should model the renewable energy contracts risks or analyze the balance sheet against the implications of investment gains and losses on everything from electric vehicle conversion to energy efficiency and inclusion training for employees.

Treasury teams need to understand green bonds and how climate risk assessment can affect lines of credit or insurance ideas.

Environment, social and governance factors are changing job profiles of finance personnel. Although this disruption may leave some people behind, people who learn or help invent this new space can add value to their company, accelerate their careers, and utilize their day-to-day work to change the world.