Sustainable finance: A new approach of economics
Sustainable finance (SF) refers to any form of finance which considers three things Environmental, Social and Governance (ESG) factors while financing to any business entity or any investment decision--aiming to bring long term benefit for both client and society. At present, different global authority, government, developing organization, corporate body and social organization are highly concerned about SF.
Many important initiatives are already taken to promote sustainable finance around the world. Especially they work for under developing and developing countries for SF implications. Consequently Bangladesh have ample opportunity and could be one of best territory for utilizing, adapting and implementing sustainable finance approach that can positively change our society, boosting our economy, save our environment, ensure more human rights for the following reasons.
Ensure quality products, human rights and work environment: Although there are rules, regulations, law and guideline for product and service quality, employee rights, working environment for each business, but this is no doubt, no business can follow this rules and regulations properly in Bangladesh. Product starts from baby food to mass people food, consumer goods to industrial goods, medical service, education service, financial service everywhere quality is far away from their standard. Sustainable finance can play an important role against this non-standards product and service as well as poor working environment.
As 'Sustainable Finance considers ESG (environment, social, governance) are factors while financing, any business organization have to comply and confirm product and service quality, good governance, better environment and employee rights for eligibility of their finance from difference sources. As finance is important faction for the business, Sustainable Finance may be effective guard along with business law and regulation to conduct the business better way than before.
Bangladesh is focused for climate finance: Climate finance is the part of sustainable finance which is considered as tools to face the challenges of global warming, reducing greenhouse gas (GHG), carbon emission and other environmental issues. By implementing climate finance approach to different environment friendly technology, industry, business and so on, the mentioned challenges can be faced. Bangladesh is in the list of most vulnerable countries on climate change issues, and that's why it focuses on climate change fund.
According to Bangladesh Climate change trust, since 2009-10 up to the 2016-17 fiscal year, a total of 3100 (three thousand one hundred) core taka has been allocated to Bangladesh Climate Change Trust Fund. The World Economic Forum says by 2020, about $5.7 trillion will need to be invested annually in green infrastructure, much of that will be in today's developing world like Bangladesh. Proper utilization of this sustainable finance can check our environment vulnerability and impact our economy positively.
Making the banking and financial institute more sustainable and resilience: Currently, the banking sector of Bangladesh is working in a very critical condition, especially for poor credit quality and defaulter issues. Sustainable finance provides ample opportunity to banks and (financial institute) FI to make financial industry more resilience and stable. Bank can source huge low cost sustainable fund from global platform and invest them to renewal energy sector, like solar, wind, biogas, as a form of retail, trade, project and corporate finance. Bank can invest on ecotourism industry as we have largest beach of the world, also finance on eco-friendly industries, like environment friendly brick industry, real-estate, firming industry etc.
Most of the business or industry of Bangladesh not complies with environmental, social or governance factor, banks has opportunity to disburse sustainable finance to this business which can change traditional business culture that makes both bank &business more sustainable. So by utilize SF bank can acquire low cost liability side product like deposit and fund in one side, on the other side it can ensure credit quality by financing money to different long term sustainable business that make banking industry more stable, resilience and sustainable than before.
Opportunity for carbon trade: By investing Climate Fund and sustainable finance on green technology, business and project, the amount of carbon can be reduced can sold to different industries and authorities of developed countries which is called carbon trade. Per ton carbon credit can be sold $10 to $12 in international market now. Present carbon market size is $100 billion & within 2030 it would be $200 billion. Bangladesh has huge opportunity for earning additional profit by carbon trade which is the part of sustainable finance by investing SF to different green industry.
Money is important to improve living standard, eliminate poverty, create better employment opportunities and facilitate many other things those can ensure welfare for the common people. But present financial approach works against environment--destroy our natural resources and increase social discrimination. Sustainable finance works to make a different sense of money, offsetting all drawbacks of present financial system and approaches.
Sustainable finance considers money as a tool to social and environmental development. In Bangladesh, sustainable finance approach can play very important role to maintain product and service quality, reduce financial and social discrimination and save our environment. Adaptation of sustainable finance approach depends on policy reform and social awareness. We hope policy maker, social leader and common people of Bangladesh to be more aware about sustainable finance.
The writer is AVP at Mutual Trust Bank Ltd