Finance Monthly March 2020 Edition

operations, any lapse in compliance with human rights regulations, labour norms or ethical practices can result in investor backlash, reputation loss, and punitive damages. Business economics is slowly shifting towards green resources as natural gas becomes cheaper than coal and other renewable forms of energy become more economical, predictable and scalable. Digital technologies are also supporting the shift to environment-friendly, cost-saving options such as online channels, digitised documentation, robo-wealth advisers, chatbots, smart assistants and cloud computing. The generations of today and tomorrow are socially conscious and expect enterprises to espouse only for the greater good but also because it is good for business. Here are some reasons why sustainable finance and investment are the right way forward. Climate change is not only a reality, it is an emergency in some countries. While international accords, such as the Paris Agreement, and domestic regulators battle the crisis through legislation, it is also incumbent upon private enterprises to do their bit by adopting sustainable practices, making impactful investments and improving transparency and governance. Neglectingthelastcanhaveextremely painful consequences, as we know from the 2008 Financial Crisis. What’s more, for corporations with global ESG FINANCE: Good for Planet Earth, Better for Business oday, the world of finance and investment is being held accountable to a new standard. And its colour is green. Global institutions, such as the United Nations, World Bank, World Economic Forum and International Monetary Fund, and activist agencies are the driving force behind the adoption of ESG (Environmental, Social and Governance) Standards in socially responsible investing. Worldwide sustainable investments, covering environmental, social and governance, and impact investing, have grown sharply in the last few years to exceed US$ 30 trillion as at the start of 2018. But this is only the beginning. ESG investing needs to grow, not In a move that’s raising eyebrows, European Central Bank Chief Christine Lagarde is proposing to explore the ECB’s role in fighting climate change in the upcoming strategic review. Meanwhile, TCI, a hedge fund and brainchild of climate activist Sir Christopher Hohn is putting its money where its mouth is – in value-based investments. Moody’s routinely factors climate risk in its ratings and analysis. Ajay Vij Senior Vice President and Industry Head, Financial Services at Infosys INVESTMENT - ESG FINANCE 52 www.finance-monthly.com