Sustainable finance is the finance sector that deals with ensuring the sustainability of an investment over time. The time horizon that guides sustainable finance is the long term and its guiding principle is sustainable development.
Sustainable finance is committed to investing in tools that provide social utility in addition to the economic return and do not have an excessive impact on the environment. Since 2016, Article 11 bis of the Consolidated Banking Act regulates ethical and sustainable finance operators.
Sustainable finance encompasses financial assets that follow ESG criteria, i.e. Environment, Society and Governance.
The Eurosif (European Forum for Sustainable and Responsible Investment) has identified seven strategies for investing responsibly: thematic investments, best in class, investing in companies that comply with international development norms and standards, exclusion of the less ethical ones, integration of ESG as instances for the management of investment decisions, client involvement and consideration of the impact investing of the companies in which one invests.
In the last few years sustainable finance has obtained growing recognition: both the forums and the national and international associations dealing with sustainable finance tools and issues are increasing, from the aforementioned Eurosif to the Global Sustainable Investment Alliance (GSIA), passing through the commitment shown since 2005 by the UN.
This sector of finance is a component of ethical finance, even if the latter includes investments of a wider ethical nature and scope, supported by social, political, religious motivations and which do not necessarily have to be considered sustainable.
For further information, please refer to the guide “What is Impact Investing: the new frontier of the investment world”
