5.3 The future of sustainable finance: a concluding remark

This article is part of the Sustainable Finance Guide, a new series by Globalfields in collaboration with illuminem. Together, we provide readers with clear, educational insights into where sustainable finance stands today and how it is evolving to support nature, regeneration, and long-term resilience. 

This guide has set out a wide range of issues related to sustainable finance. We have discussed the efforts to integrate the concepts of sustainability, justice and environmental protection and restoration into finance. However, recent years have seen a rolling back of ambitions and increasing challenges to this endeavour. 

This reminds us that, contrary to what we might hope, the journey towards a more just and sustainable world is not one of uninterrupted progress, but rather that it may sometimes resemble a convoluted or even circuitous path.

It is, in this context, perhaps of interest to observe that much of the progress that has been made in sustainable finance over the last 25 years is due to committed individuals and groups of professionals, who have set up the reliable and robust, collaborative systems that are now being used to track the flows of funds going into sustainable and green projects, and upon which taxonomies and reporting frameworks are based. The development of the sustainable finance frameworks that we are using today has thus not been based on a single, clearly articulated vision developed at the top and then implemented top down, but rather it has grown bottom-up, top-down and horizontally, all at the same time. 

This happened organically and in response to a range of initiatives, institutional needs and evolving policy frameworks, for example related to performance management, rather than overarching concepts of what sustainable and green finance should look like.

This presents us with both a challenge and an opportunity. 

The challenge is that without a clearly articulated and shared vision and a strong conceptual framework, sustainable finance will continue to struggle to be taken seriously in the boardrooms of the major financial institutions of the world. The effect of this can be seen in the withering of initiatives such as GFANZ, and the abandonment of environment and social objectives by major financial institutions, if they ever adopted them in the first place. The system we have built has not been strong enough to withstand the resistance it is encountering, because the resistance is driven by a clearly articulated vision and vested interests, and sustainable finance is not, or at least not to the same degree. 

The opportunity, on the other hand, is that we have successfully established frameworks for climate finance tracking, green taxonomies and green and climate bonds. We can argue about the details, and most of us would acknowledge that there is substantial additional development work to be done, especially in the need to integrate Just Transition concepts into these systems, but that does not mean that these tools of sustainable finance do not function. Instead, like any tool, it means that they can and need to be further improved to perform even better.

But, to really deliver the reallocation of capital towards justice, towards environmental protection and aspiration, and towards the protection of the world’s climate, these tools need to be framed by a strong and shared vision. The fact that we do not have this is not the failure of financial institutions, it is a failure of leadership, of not recognising the importance that the redirection of financial flows has for the continued functioning of financial systems, and therefore the economy. 

The world’s current financial system is not built on justice and protecting our shared planet, it is built on exploitation. A critical lesson of history is that systems based on exploitation eventually collapse, because they hollow out the very base on which they are resting. 

The choice we have to make, therefore, is whether we will continue to march towards system collapse, or whether we have the vision and the strength to build a new, just and sustainable financial system.

The views expressed are for informational purposes only and do not constitute financial, legal, or investment advice.

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