Sustainable finance: definition, taxonomy, observers, training…

Sustainable finance is becoming more and more important in our society and in businesses. Between climate and social problems, the European taxonomy and the development of dedicated institutions and training, green finance is a source of new challenges and opportunities.

Sustainable finance: definition

Sustainable finance refers to all financial actions that take into account extra-financial criteria, whether environmental, social or governance. The objective of sustainable finance is to benefit the community in the long term, hence its English name “sustainable”. Sustainable finance therefore makes it possible to direct the investments made by different financiers towards activities that have a positive impact on society, such as renewable energies or social housing.

In sustainable finance, there are four concepts:

Solidarity finance which brings together all investments oriented towards social projects. Including activities such as employment integration, housing assistance, the environment and international solidarity. These products are distinguished in particular by the Finansol label, which distinguishes solidarity savings products from other savings products. It is awarded by a committee of independent experts and assures savers that their savings really contribute to social or environmental activities.

Responsible finance concerns investments that take into account not only the financial criteria, but also the extra-financial criteria, based on the Environmental, Social and Governance (ESG) impact. Employee welfare, salary transparency and the feminization of boards of directors are being studied. Socially Responsible Investment (SRI) is a label that is awarded to funds with a good ESG rating and helps attract more investors.

Green finance finance actions with a positive impact on the environment. The best known green financial products are green bonds or green links. These bonds are issued by an economic actor to finance his ecological transition. The Greenfin label is awarded to funds that invest in these ecological projects.

At last, social affairs brings together companies with a social vocation and not necessarily for profit. The profits are reinvested in actions to fight against exclusion or in favor of environmental protection, development and solidarity.

Also read: SKEMA BS launches a new MSc dedicated to responsible finance and FinTechs

The actors of sustainable finance

The actors and investors are different and varied in sustainable finance. Any entity with funds can, in itself, invest in sustainable boyfriends. We therefore distinguish four major actors:

Saviors can invest directly in companies and associations that carry out actions or build projects related to sustainable finance.

Investment funds are among the main players in sustainable finance, due to their investment capacity. Whether they are institutional or private, they invest in responsible finance, which allows them to reconcile financial, social and environmental benefits.

pension funds they are also slowly starting to invest in sustainable finance, although they have been reluctant for a long time to make these investments.

Private banks they are also important players in sustainable finance. In 30 years, capital investment in green finance is expected to increase. Indeed, while the baby-boom generation is less inclined to invest in sustainable finance, almost 20% of young people born in the 1990s want to invest in companies with a high ESG score, which should greatly modify the flows. .

In addition, the Autorité des Marchés Financiers (AMF) is particularly committed to sustainable finance. Green finance is part of the #Supervision2022 strategic plan, which aims to integrate the digital revolution and adapt to new financial challenges, including sustainable finance. The AMF has also created the “Climate and Sustainable Finance” Commission, which brings together several parties such as financial experts, business leaders and professors on sustainable boyfriend topics.

Also read: AMF certification: Everything you need to know about this exam in the world of finance

The Observatory of Sustainable Finance

The Sustainable Finance Observatory is also a major player in green finance. Its purpose is to promote a more transparent finance and to highlight the various entities that are moving towards a sustainable finance. The Observatory of Sustainable Finance offers two different types of data: the transformation of practices and financial flows and the monitoring of the commitments of financial actors.

The transformation of practices and financial flows presents various data that testify to the evolution of financial actors towards sustainable finance. Companies are classified according to the sector of activity. It includes management companies, insurance companies, private equity, banks and specialized financial institutions. Four topics are studied to make a report on the transition of companies towards sustainable finance: the planned strategy to get out of carbon financing, the financing of a low-carbon transition, the responsible management of financial practices ( ESG criteria), the offer of responsible and labeled products.

The monitoring of the commitments of the financial actors meets the objective of transparency desired by the Observatory of Sustainable Finance. Lists all public statements made by financial actors. These publications are made voluntarily by the actors to communicate about their sustainable initiatives.

Also read: EDHEC launches a new master’s in responsible finance!

Taxonomy of sustainable finance

To achieve the goals of the Paris Agreement and achieve carbon neutrality by 2050, the European Union needs to direct financial flows towards sustainable finance. Companies therefore have an important role in this migration of financial flows. The latter have to publish the share of sustainable activities in their activities, whether their turnover, their tangible and intangible investment expenditure or operating expenses or current expenses. By making this data transparent and public, the objective is to encourage companies to direct their investments more towards sustainable finance.

The taxonomy of sustainable finance can be an opportunity for companies. By demonstrating their actions for a greener finance, organizations are better able to attract investors and stand out in tender calls. They can also access green loans and benefit from more attractive rates.

The taxonomy aims to meet the objectives set by the Paris agreements and the 17 Sustainable Development Goals (SDGs) of the UN, including gender equality, access to clean energy to a affordable cost, the eradication of poverty and the fight against global warming.

Also read: Podcasts about finance to listen to when you want to learn

Masters and training courses in sustainable finance

With climate and social issues, the European taxonomy and the development of institutions dedicated to this new finance, training courses dedicated to sustainable finance are born. The goal is to train professionals who have financial and extra-financial knowledge.

Many business schools offer Masters in green finance. EDHEC offers an MSc (Master of Science) Climate Change and Sustainable Finance that allows students to develop financial competence and explore the challenges of the low-carbon transition. KEDGE also offers an MSc in Sustainable Finance to acquire a dual competence, financial and extra-financial. The program is accessible to students with a bac + 3 or a bac + 4.

These courses are not just for teachers. Indeed, some schools like SKEMA offers a PhD in sustainability, to allow young workers to know how to identify objectives, to propose sustainable solutions and to help companies towards their sustainable transition. From his side, Audencia created Gaïa, the school of sustainable development where students learn to take into account, in their work, subjects related to sustainable finance or ecological transition.

At the end of a course oriented towards sustainable finance, a wide range of professions are available to young graduates: ESG/SRI analyst in investment funds, sustainable and responsible finance strategy consultant, CSR manager or even research analyst ESG. Average dropout salaries are estimated between €35,000 and €40,000 per year, with an employment rate of over 90% within 6 months of graduation.

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