What is it?
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Sustainable finance is a system that covers all types of financial services that integrate environmental, social and governance (ESG) criteria into business and investment decisions for the benefit of society and business. Contrary to the risk and return concepts of traditional finance, the main objective of sustainable finance is to provide resources for investments that stand out in ESG areas.
Sustainable Finance Solutions
The concept of "responsible/sustainable investment", which integrates financial return with the aim of creating a positive social and environmental impact, is growing in popularity every year. Investors, who also consider the social and environmental impact of their investments, try to make decisions by considering this impact among the options. We have briefly explained the most preferred responsible investment instruments today.
ESG Focused Investment
ESG-driven investing is the incorporation of environmental, social and governance issues into the investment process that can have significant impacts on the performance of the investment. ESG-focused investing adds potential non-financial risks and opportunities to traditional financial analysis. While these investments are conscious of creating social and environmental benefits, the ultimate goal is to improve financial results. ESG elements are therefore treated as a component of improving financial returns. In 2022, the global amount of ESG-focused investments is estimated to be 126 trillion USD .
Responsible Investment
Responsible investment is defined by the "United Nations Principles for Responsible Investment" (UN PRI) as an approach to integrating ESG criteria into investment decisions. Responsible investment goes one step further than ESG-oriented investments as it takes into account social, environmental and governance factors as well as certain ethical rules. According to UN data, the amount of responsible investment in the world in 2022 was 41 trillion USD .
Socially Responsible Investment (SRI)
Socially responsible investing (SRI), also known as value-based or ethical investing, uses negative screening to avoid investing in companies that have negative impacts on the environment or society. Negative screening is an approach to avoid investing in companies or organizations whose activities conflict with the investor's values. After this screening, certain sectors are excluded from investment options. In this way, it is tried to prevent the investment portfolio from causing negative results.
Impact Investing
Impact investing supports investing in companies or funds that prioritize social or environmental impact over financial return. In impact investing, investments are expected to have a positive impact. The purpose of this investment is to help an organization achieve specific goals that are beneficial to society or the environment. In impact investing, social impact is a more important outcome than financial gain. Impact investing market reaches USD 1.2 billion in 2022