Page 23 - IMDR JOURNAL 22-23

IMDR’s Journal of Management Development and Research 2022-23

Sustainable Finance: The Future of Investment

Sajana Kashtey, PGDM II, IMDR

Dr. Shilpa Kulkarni, Assistant Professor,
DES’s Institute of Management Development and Research (IMDR), Pune

Abstract
Sustainable finance refers to the integration of environmental, social, and governance (ESG) factors
into financial decision-making processes and investment strategies. It is a rapidly growing field that
aims to generate positive social and environmental impacts while delivering financial returns. The
Research paper is a review-based analysis of the current trends in sustainable finance and underlines
the importance of sustainable finance. The research paper analysis ESG reports of global and Indian
firms. The comparative analysis suggests that Indian organizations acknowledge the importance of
ESG and hence report the issues. The percentage is yet small but picking up.

Keywords: ESG, Sustainable Finance, Responsible Investments,

Introduction:
A recent United Nations report warns that the planet is on track to warm by more than 3 degrees
Celsius by the year 2100, posing a major risk to ecology. The report says that the globe is now hotter
than it has been in at least 12000 years. In the last 20 years, about 500,000 people have perished as a
result of climate-related disasters, and the worst of last year's calamities caused at least $150 billion in
damage. Further adding that climate change is not the only environmental crisis humans face. The
globe is also undergoing a major extinction that might wipe out over a million species in the next
decades, and this biodiversity loss is already costing people.
To overcome these issues a concept called sustainable finance was introduced in 1992 at the Rio Earth
Summit by a group of visionary leaders who believe that transforming private finance would be key to
achieving sustainable development.
Sustainable finance refers to the process of considering environmental, social, and governance factors
while making financial investment decisions. According to the European Union, sustainable finance not
only encourages economic growth but also takes Environmental, social and governance factors into
account. The ESG idea encourages leading corporations to make long-term investments in sustainable
economic operations and projects. It is a comprehensive evaluation of how a company manages its risk
and rewards and how it produces opportunities that can change both market and nonmarket
environments.
The ESG Environmental standards discuss a company's conservation efforts and environmental
stewardship. Climate change mitigation and adaptation, as well as environmental factors in general,
such as greenhouse gas emissions, biodiversity preservation, pollution avoidance, and the circular
economy, may be included in environmental debates. Human rights issues, as well as inequality,
inclusivity, labour relations, investments in human capital, and community development, are examples
of social elements. All governance factors are executive pay, transparency, board independence, and
shareholder rights. The governance of public and commercial organizations, which includes
management structures, employee relations, and CEO compensation, is critical in assuring the
incorporation of social and environmental factors in decision-making.
Transparency is also incorporated into sustainable finance when it comes to the risks connected with
ESG factors that could have an impact on the financial system, as well as the mitigation of such risks
through good governance of financial and corporate entities. These ESG elements distinguish
23