Green Financing and Organizational Sustainability

Analysis of the Field
The concept of sustainability has gained considerable popularity in the recent past. Sustainability generally refers to the continued existence of systems and processes. Traditionally, sustainability was discussed mainly in the context of ecology and biological systems, but today the concept has stretched to entirely every discipline including management, economics, business, politics, and culture. The increasing attention on sustainability has largely been informed by the danger posed by human activities on the environment. For instance, using fossil fuels depletes the ozone layer, which in turn causes climate change. Nonetheless, from what has been achieved so far, it is evident that sustainable development is a realisable endeavour (Bowdin et al., 2011). Sustainable development basically refers to a road map for attaining sustainability in any process or activity that utilises resources. It is development that fulfils present needs without shortening the capacity of future generations to fulfil their needs.
Organizational sustainability takes into account having the ability to keep the business going in having the capacity to address and satisfy the needs of prevailing consumers while taking into consideration the needs of future generations. It encompasses the creation of value that is incessant with the longstanding preservation and augmentation of financial, environmental, and social capital. Trends such as change in demography, globalization, as well as climate change in tandem with social inequity have given rise to a major challenge to the conventional business model with its emphasis on shareholder value. Aspects such as scandals within corporations as well as the financial crises have led to a significant loss of trust in business. As a result, corporations are experiencing pressures from consumers, investors, employees and also the government to show that they are espousing ethical as well as sustainable practices (Wales, 2013). There are significant issues and current dilemmas ensuing in the field of sustainability. These include the status of regional ties, for instance the occurrence of Brexit, climate change, corporate governance, big data and also the manner in which the sustainability development goals (SDGs) are changing corporate reporting (Slavin, 2016).
Research Topic: Green Financing
Background
One of the key topics in the area of sustainability in the present day setting is green finance. The growing scientific proof backing climate change and the role of human actions in greenhouse gas emissions has given rise to the issue coming to be a major element on the global agenda. Nations came to the agreement of restricting average temperature warming to 2 degrees Celsius, which is the verge past which hazardous climate change is projected. Numerous nations, together with China on their own accord dedicated to decrease or restrict their carbon emissions by 2020. In this regard, China has been substantially escalating its green tech and renewable sectors. Financing is a fundamental facilitator to these frequently large, capital intensive projects, and as a result banks in the nations continue to play a vital role in aiding China accomplish its pledges to decreased carbon intensity by 40 to 50 percent in 2020. This has given rise to China’s headship in green finance. Green finance is delineated as financial products and services, under the thoughtfulness of environmental factors all the way through the loaning decision making, ex-post monitoring and risk management procedures, rendered to endorse environmentally responsible investments and encourage low-carbon know-hows, projects, industries and businesses (Price Waterhouse Coopers, 2013).
Presently, banks in China seem to have made advancements in the area of green finance. The inclination of increasing lending done to green sectors and the deteriorating lending to industries that are energy intensive and produce high pollution levels given the indications that green finance is progressing in China. In particular, the prominent and leading corporations in the Chinese banking sector consider green finance as a prospective area for profitable growth in the long-term. In particular, green finance is perceived as a chance to expand the variety of services being offered by banks and creates the aspect that the organizations which act fast will have a competitive advantage over its rivals (Price Waterhouse Coopers, 2013). In the past year, the issuance of green bonds rose sharply by 120 percent to a total amount of $93.4 billion globally and this figure is projected to become more than twofold in the following year 2017 to approximately $206 million. From the global issuance, the issuers from China constituted more than 30 percent of the entire volume in the 2016 fiscal year as the nation hurries to improve its green investment. Moreover, it is projected that the demand from China will rise in the next few years as it takes into account the actuality of pollution following its fast industrial growth. In addition, green finance got major support from the 2015 Paris agreement, which was taken up and agreed to by approximately 200 countries which appears to move to renewable energy by 2050 (Moskowitz, 2017).
Current Theories and Areas of Debate
A key area of debate encompasses what the real influence on the environment is. With respect to green finance, there continues to be ambiguity in measuring environmental impact. There is contention on how the environmental benefits an advantages of an investment project can be examined and appraised. The questions is whether the solution lies in the conventional and normal application of a measuring component or in the improvised measuring of every project, taking into consideration that every project is financed in a different manner. It is imperative to take into account that every green bond issues is dissimilar and therefore the environmental impact will most likely be measured by projection and anticipations of the project, its implementations and outcomes (Revelli, 2017). The effort and determination necessitated to set up a green bond more often than not gives rise to the issuer asking for extra remuneration from the investor so as to pay for this particular cost. Another issue is that the pricing is intricate, owing to the fact that the investors are not ready at all times to compensate more for a project that could have been financed by a conventional bond. This can generate an inequity and disparity between demand and supply, but as it stands with responsible equity investment, green investors in the bond market are time and again equipped and willing to pay more because in this regard price is not their main concern (Revelli, 2017).
Another area of concern and contention with regard to green finance encompasses greenwashing. This can be delineated as the instance where a corporation or issuer will overstate and embellish their environmental qualifications. Despite the fact that a number of Green Bond Principles was unveiled in 2014 to motivate and embolden transparency, disclosure, and integrity within the market, there is a great need for addition effort and work to be undertaken so as to safeguard the promising industry’s repute and status. The aspect of disclosure brings to the fore an important aspect of CSR – transparency and accountability. The notion of transparency means that business organizations ought to truthfully reveal their strategy, practices, policies, governance measures, and ethical standards. Also, business organizations must disclose the ways in which their operations affect the society, economy, and the environment, whether negative or positive. Indeed, transparency and CSR cannot be separated. Complete transparency, however, is yet to be achieved. It is common for organizations to hide negative aspects of their operations in an attempt to guard their reputation (Idowu and Filho, 2009). This is a vital aspect owing to the fact that it is solely through this sort of novelty that sustainable finance can accomplish and make the most of its potential. Lack of the capacity for investors and stakeholders in easily ascertaining projects that have high environmental quality, then it will become more challenging for the industry to enhance transparency as well as generate trustworthiness (Nassif, 2017).
Industries and Technologies Impacted and Maximization
There are particular industries as well as technologies that will be impacted by green finance. It has augmented industrial energy conservation and advancement in a number of key industries comprising building materials, iron and steel, petrochemicals and chemicals, energy-saving and new-energy automobiles, industrial energy conservation, non-ferrous metals and clean production (Price Waterhouse Coopers, 2013). Other industries that have been impacted include the insurance and mobile industries. As outlined, in African nations such as Kenya and Morocco, mobile transaction payments and insurance have facilitates consumers to gain access to energy sources, which are not only cheaper but also more reliable.
Without doubt, this impact is positive and there are different ways in which it can be maximized. In the present day, there are several examples of developing nations demonstrating string leadership on green finance. This is largely positive as private capital will be a key determining factor and contributor to rendering the dedications made on the Sustainable Development Goals. Technology influenced is mobile banking. For instance, in Kenya, the impressive and fast-paced growth and development of mobile banking has come to be a platform to facilitate renewable energy. In the contemporary, numerous organizations offers pay-as-you-go solar systems for households that employ mobile payments in order to allow the consumers to use solar panels as well as the battery system on an everyday basis. As a result, this makes it possible for consumers to accumulate a history of credit, which can be shown in financial institutions to gain accessibility to extra loans (Szymanski, 2016). In the Philippines, an insurance pool has been created involving both the public and private sectors and this has made it mandatory for homeowners as well as small and medium enterprises (SMEs) to have disaster insurance. This will offer households and small businesses with more fast and dependable support for reconstruction and at the same time will facilitate economic and financial stability in a nation where natural occurrences can give rise to losses of numerous points of the Gross Domestic Product (GDP) (Szymanski, 2016).
Future Directions
In the past year, green finance experienced its greatest level of progress and advancement. During the G20 summit, the heads of states acknowledged the great need for scaling up and augmenting green finance. In addition, major regulators in the insurance sector were in agreement that there was a need to work in tandem to determine solutions to sustainability challenges. Taking into consideration that global carbon emissions are delaying in addition to the deterioration in costs for clean tech, the future direction of green finance is to increase the stride. In particular, financial institutions that have assets valued at trillions of dollars are presently dedicated to bringing their portfolios in line with the low-carbon changeover and sustainable development more extensively. However, the definite restructuring of capital continues of be inadequate. Amid the great deal of prospects that prevail, three practical steps are noticeable. Therefore, to begin with, in terms of future direction, sustainable financial plans ought to be unveiled at the nationwide level. Secondly, it is imperative to target public determination and endeavor where market forces are not able to reach. In addition, there is the need to embolden an actual coming together at the global level with respect to the rules of the game that fashion the financial markets, for instance market principles and financial rules and regulations (Robins, 2017). Moreover, the prevailing low-carbon policy targets can easily be accomplished and attained. However, additional endeavors and determinations are necessary if more aspiring and motivated targets are agreed upon. The existing targets for greenhouse gas emissions concentration of the economy can be attained on the basis of the prevailing energy structure, energy know-hows as well as efficiency in energy consumption. It is conceivable that these targets can be attained. However additional determinations may be necessary for more motivated targets to sustain the rise in global temperature below 2 degrees Celsius (Zheng, 2015).
Further Research that is Beneficial
A specific area of further research in green finance that would prove beneficial is the inclusion of the public sector. As is known, a great deal of green finance as well as climate finance will emanate from the private sector. However, from past experiences, it has been understood that devoid of an amalgamation of public finance together with policy agendas, there will be an absence in the flow of capital. Specifically, this will be experienced in developing nations, where majority of important financial markets continue to lack and where their national governments fashion a huge portion of capital placement by means of state-owned financial institutions, lending that is steered through policies and also through development banks. Therefore, a key area of research that might prove to be beneficial encompasses the targeting of public determination where market forces are not able to reach or influence (Robins, 2017).
Potential Impact and Future Directions of Sustainability Research
In simplicity, green finance encompasses the funding of investments that create environmental benefits as part of the more comprehensive strategy to accomplish wide-ranging, robust and sustainable development. There is great and progressively increasing potential in green finance. In the recent periods, green finance has rapidly grown to become an efficacious component in the international impetus to develop and finance clean energy solutions. Taking into consideration that governments across the globe and laying emphasis on decreasing carbon emissions, sustainable funding options are a progressively more widely held instrument in the quest for accomplishing climate change targets. The incentive to embrace green finance is forthright. Above and beyond portfolio broadening, numerous investors are on the spot from asset owners and stockholders equally to assimilate environmental, social and governance ideologies into their investment policymaking practice. With respect to the asset issuers, away from being perceived to be good corporate citizens, green bonds, for instance, have the ability to uncover and accelerate fresh capital flows in terms of new investors. In addition, it directs a robust communication as to a corporation’s core values and philosophies. Despite the fact that the market is still to a great extent in its early stages, the approval of sustainable finance continues to grow. Nonetheless regardless of the fast increase in demand for green finance products, we are yet to get to the core and maximize it in terms of its scalability (Nassif, 2017).









References
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