Sustainable Finance & Investor Demand

Sustainable finance is growing across the world. Stakeholders in the finance sector have understood the importance of sustainability noted by Bahaa Abdul Hussein. This had led to the growth of sustainable finance. An important factor to be noted is that the change has been spurred by investor demand. Investors are willing to invest on sustainability and this spurred the growth of sustainable finance.

A study was done recently by a leading investment company. The results of the study clearly illustrates that it is investor demand that is driving the growth of sustainable finance. Here are some highlights from this study:

  • A majority of investors believe that sustainable investing adoption is significant. Many of them believe that this is a trend seen across the board.
  • Investors believe that ESG investing offers reputational benefits. They believe that sustainable finance investments will help enhance their reputation in the market.
  • Improved stakeholder engagement is another benefit that investors believe will accrue from sustainable finance.
  • Enhanced financial performance is another benefit that investors perceive as a result of sustainable finance.
  • The key reason why investor demand has increased is enhanced financial performance. Investors perceive that sustainability helps in ensuring greater returns. It is for this reason that investors are increasingly investing in sustainable projects and businesses.
  • Investors prefer to invest mainly in climate change themes. Most investors surveyed believe that climate change is a critical issue and it is important to invest in such projects. The second such theme on which they would invest is on water solutions to solve water crises. Reduction of plastic waste is another issue where investors prefer to invest.
  • Nearly half of investors surveyed said that they preferred to invest in green bonds.

There are certain factors that have led to this increased demand. Some of them include:

  • The awareness on sustainability has increased in the investment community. More importantly, awareness on the benefits of sustainable investing has increased.
  • Across the world, regulators are giving importance to ESG investing. Earlier considered a niche investment area, it is today a mainstream investment idea. Regulator focus has ensured ESG investing has increased.

In 2021, the global market for sustainable finance was 3.6 trillion dollars. It is expected to grow to 23 trillion dollars by 2031. Apart from the increased investor demand, support from regulators and higher returns have accelerated the growth. There is no doubt that the growth story will continue with more and more investors willing to invest on sustainability.

The article has been written by Bahaa Abdul Hussein and has been published by the editorial board of


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