Sustainable finance represents financial services and investments considering environmental, social, and governance (ESG) components stated by Bahaa Abdul Hussein. With sustainability becoming a focal point, people have numerous ways to align their finances with their values. Here are some ways individuals can engage with sustainable finance:
Invest in Sustainable Funds
One of the simplest ways to join is to buy mutual funds or ETFs (exchange-traded funds) that use ESG criteria to select investments. Search for words such as “sustainable”, “ESG”, “green”, or “socially responsible” in the fund name or description. The funds invest in corporations scoring high on carbon emissions, green products/services, diversity and inclusion, and other sustainability factors. In the long run, money channelled to such companies aids the sector’s development.
Support Values-Based Banks
Individuals can also move their banking relationship to a values-based bank that prioritizes social and environmental impact. These banks aim to use money as a force for good by funding socially conscious ventures and avoiding investment in harmful industries. They may also share a portion of profits to support community development. Opening checking, savings, credit card, and lending accounts with them aligns finances with values.
Seek Sustainability-Linked Loans and Credit
Individuals can choose lenders that offer sustainability-linked loans when financing big purchases like cars and home renovations. The interest rate on the loan is tied to meeting certain environmental targets. This provides monetary incentives to choose green options, like buying an electric vehicle or making energy efficiency upgrades. Individuals can find credit cards with carbon offsets or rewards for eco-friendly spending.
Divest from Fossil Fuels
Another option is moving investment accounts away from fossil fuel holdings through divestment. Fossil fuel divestment means removing stocks, bonds, or funds that own coal, oil, and gas assets. Financial advisors can help build portfolios free of these holdings. Divestment allows people to remove support from the traditional energy sector and align investments with climate science. The global divestment movement aims to pressure the fossil fuel industry and shift capital to renewable energy.
Invest in Green Projects Locally
Incidentally, for those looking for hands-on impact, local investing is an avenue to fund local sustainability projects. Neighbourhood solar projects, green bonds, crowdfunding, and community wind farms permit people to finance environmental solutions. Returns may be lower, but the local projects allow for a direct, human connection to sustainability efforts.
Prioritize Planet Alongside Profit
With increasing consumer expectations that corporations actively prioritize people, the planet and profit, individuals can reciprocate with the same financial approach. The core of sustainable finance is considering environmental and social factors and financial return. Given a vast amount of available information and options, individuals can influence change more than ever through their money and, in turn, make a difference. People are directed to push capital towards projects advancing sustainability by selecting sustainable financial solutions and making deposits.
The article has been written by Bahaa Abdul Hussein and has been published by the editorial board of www.fintekdiary.com.
