There is a growing trend in sustainable corporate finance among leading organizations to embed sustainability into their business models. This involves not only a defensive stance towards risk mitigation but also actively seeking out new opportunities for innovation and revenue sources while simultaneously transitioning to a more sustainable business model.
One significant development in this area is the EU Taxonomy on sustainable finance, which serves as a tool for investors, companies, issuers, and project promoters to navigate the transition towards a low-carbon, resilient, and resource-efficient economy. The European Commission has established a clear linkage between ESG and finance, promoting sustainable finance and re-orienting capital flows towards sustainable investments. Financial sector companies are also launching new sustainable financial products, with climate finance serving as a demand driver.
The International Capital Markets Association has established sustainable finance principles and frameworks, including the Green Bond Principles and Sustainability Bond Guidelines. Integrating ESG into corporate functions impacts multiple levels of the corporate finance team, including the CFO, financial planner, controller, and treasurer. These individuals play a pivotal role in developing and demonstrating ESG-related strategies to improve bottom-line performance and deliver sustainable business models.
One challenge in this area is that ESG initiatives often face a disadvantage compared to other investment opportunities due to the expected rate of return and time required to achieve it. Despite this, forward-thinking corporate finance teams who respond to new opportunities will be better positioned to benefit from the changing environment.
Thank you so much Kenneth Ho for guiding me to explore the concepts of sustainable corporate finance. You are the star and made my day!
Integrating Sustainable Finance into Corporate Finance Processes: The New Norm | PwC Japan Group
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#100daysoflearning Day 026