The term green finance refers to financial investments in sustainable development projects and initiatives, and the global concern for the environment affects the public, private and academic sectors alike.
Some sectors are particularly strategic, as is the case of financial companies, where for several years now they have been developing a facilitating capacity through investments that help to get the sustainability machine rolling. Keep Reading to find out what green finance, digital finance and sustainable banking are all about.
What green finance is for
They are based on important actions to mitigate as much as possible the effects of global warming, the greatest challenge of our time, according to the UN (United Nations).
This problem is compounded by pollution, waste in the oceans, drought, deforestation, loss of biodiversity, over-consumption, waste and population growth.
Digital green finance
Digital green finance, which includes a wide range of technologies such as big data, artificial intelligence, blockchain and the Internet of Things (IoT), offers innovative solutions to expand sustainable finance, and the prospect of a more efficient, accessible and less vulnerable financial system.
Banks already recognise the importance of connecting digitalisation and sustainability for the financial system to contribute to the SDGs and the Paris Agreement.
In fact, according to the OFISO Annual Report prepared by the Spanish Sustainable Finance Observatory, in 2022, green finance in Spain reached a record €60,134 million, with an annual increase of 9%.
For her part, Joana PascualLead Investment Officer for IDB Invest, said: “Green bonds, which aim to finance renewable energy or energy efficiency projects, increased by 50% from 2020 to 2021 in Latin America; we are talking about a $5.4 trillion industry”..
In this way, the pieces of the puzzle can fit together. If banking identifies, quantifies and prices and capitalises on climate risks while facilitating access to finance for those activities that contribute to sustainable transformation, we have the equation towards a green economy.
How to achieve sustainable backing
This responsibility finds its best ally in training. The new sustainable banking requires absolute knowledge of the financial resources that respond to environmental urgencies. Examples such as CaixaBank, which is implementing a sustainability training plan for 100% of its staff, are proof of this.
There are movements in all entities. BBVA was the first Spanish bank to join ‘Every Action Counts’, a coalition promoted by the Alliance for Green Digital Finance, which involves 1 billion citizens around the world to promote action and ecological awareness in the run-up to 2025.
Banco Santander has developed the Sustainable Finance Rating System, a document inspired by the European Union (EU) Taxonomy.
And recently, the European Investment Bank (EIB) and Grupo Cooperativo Cajamar signed an agreement to purchase a €350 million mortgage bond that will enable the Cajamar cooperative bank to mobilise up to €784 million to support investment in SME and mid-cap projects, especially those operating in rural areas and linked to the agri-food sector, and up to €196 million to accelerate the green transition.
These measures are some examples of the commitment to a better future. In every crisis there are opportunities and the current one is ideal for sustainable finance to continue to grow exponentially. In MIAM Online, we teach you everything you need to know about green finance.
