What are Sustainable Finance and Green Bonds

Did you know that the financial system also plays a role in preserving the environment?

Financial institutions play a fundamental role in building sustainable development. Through the sustainable finance, financial system agents can largely contribute to a better future for everyone.

Read this other article about sustainability on our blog.

Sustainable finance is already a demand from society for banks to use resources obtained through financing and credit securities in socio-environmental initiatives.

In this text, you will learn more about sustainable finance. And how they can still change the financial system once and for all.

If you have any questions, write a comment at the bottom of the page.

Good reading!

What are sustainable finances

They represent a change of mindset for capital managers.

Imagine a world where banks have real socio-environmental awareness, where all their fiduciary power and capital allocation were used only in environmentally responsible companies and projects.

The impacts on the environment and society would certainly be much smaller.

There are those who believe that this is impossible: combining capital with the preservation of nature. However, several companies are committed to this mission and have already found a way to produce and generate capital without compromising the environment.

One proof of this is the Paris Agreement which stipulates a goal to control the increase in Earth's temperature. Several Brazilian companies have worked to achieve these objectives, establishing and following science-based goals.

However, corporations alone are not enough. There must be a great collective effort from all agents in the economy: government, banks, financial institutions, investors and ordinary citizens.

For this reason, financial institutions came under pressure from civil society, which organized massive campaigns in the 90s on creditor responsibility, aiming to think about the way in which these financial resources were used and applied.

But how can banks change?

Simple. They can accelerate the process of changing companies' mindsets. Imagine if a company was denied credit for not having good sustainability practices?

This would certainly cause the market's socio-environmental concern to rise immediately. The opposite must also be real, companies with conscious attitudes benefit from the release of credit.

The green economy may seem utopian, but thousands of companies and banks have already taken important steps. One of them is the topic of our next topic.

The role of green bonds (or green bonds)

This is a tool to promote the green economy.

They are debt securities designed to encourage investments in environmentally responsible projects, focused on their social impacts. In other words, they raise funds for activities proven to be relevant in defending environmental values.

These papers are issued by companies and financial institutions with the aim of enabling projects that have a positive environmental impact.

These titles require a high degree of transparency from companies, as they are always subject to external evaluation.

A group of application managers, led by Climate Bonds Initiative and responsible for the allocation of around R$ 1.6 trillion, issued statement to reaffirm its commitment to the threats and effects of climate changes.

Some of the most important agents in the Brazilian financial market have signed this declaration, such as BTG Pactual, BB DTVM, Itaú Asset Management, Santander Asset Management, Sul América Investimentos and UBS Brasil.

As the problem of global warming is one of the priorities, there is also an exclusive title for investments in climate issues: you Climate Bonds.

Socio-environmental projects need financial stimulus. And unfortunately, many governments do not have the necessary capital to support this mission to transition to a low-carbon economy.

Therefore, the titles Green It is Climate They constitute a way for companies and investors to implement and facilitate important projects to continue on the path to sustainable development.

According to the Climate Bonds Initiative, as of September 2016 there was a balance of over US$140 billion in labeled Green Bonds globally. While another US$ 576 billion represented unlabeled securities. In other words, bonds that would have the potential to be green but were not considered as such.

See the differences between true titles and conventional titles:

Conclusion

Do you believe that sustainable finance is a possible initiative?

It may be difficult for some people to imagine a capital market with socio-environmental awareness. However, sustainable finance must be the next step in the evolution of capitalism.

The financial work of these agents needs to be economically viable, socially fair and environmentally correct. It is the only way to put financial resources at the service of sustainable development.

Green bonds are a great way for the economy to do its part, raising resources and lending to causes. Thus, the managers of these projects pay the debt with interest, which is passed on to investors.

See these other articles on our blog about sustainable development:

• How to create a sustainable logistics plan?
• Water Resources Management: what is it and how to apply it in my company?
• Working for the Paris Agreement: a commitment from Brazil

It is a win-win relationship. If you are an investor, ask your bank or broker if there are green bonds available to be added to your investment portfolio.

These titles are still new here, but they are already a huge success in various parts of the world. To boost this market in the country, the Brazilian Business Council for Sustainable Development (CEBDS) and Febraban launched, in October 2016, the Guide for Issuing Green Bonds in Brazil.

At the end of 2017, CEBDS, in partnership with Strategic Alliance, launched the pupublication Green Bonds – Ecosystem, Issuance, Process and Regional Perspectives. The publication, presented during the COP23, presents an overview of green bonds in the Brazilian context, addressing the ecosystem in which this market has been developing, the main actors involved, the issuance process and the challenges of expanding this debenture in the country.

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