The World Sustainable Finance Association (WSFA) promotes sustainable finance theories and practices worldwide to find innovative long term solutions to complicated sustainability issues, and facilitates communication among investors, corporations, policymakers, and academia who are interested in better integrating sustainability concerns with economic activities.
Join in WSFA will help you with professional development.
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Find the 10 reasons to join WSFA here.
WSFA also manages the standards of the Certified Sustainable Finance Analyst (CSFA™) and Certified Professional for ESG Reporting (CP/ESGR™). It provides CSFA™ and CP/ESGR™ trainings through the Sustainable Finance Institute.
The World Sustainable Finance Association is also advocating the World Sustainability Museum - the world's first and only museums dedicated to the United Nations Sustainable Development Goals (UN SDGs) and best practice cases from around the world.
Sustainable Finance is the broadest heading. According to the European Commission (EC), it refers to the process of taking account of environmental, social and governance considerations when making investment decisions, leading to increased investment in longer-term and more sustainable activities.
The meaning of sustainability is rooted in the notion of sustainable development, as advanced by Brundtland (1987). The Global Sustainable Investment Alliance (GSIA) estimates that $30.7trn at the start of 2018 were in “sustainable investing assets”.
In a broad sense, Sustainable Finance is often interchangeable with the following terms:
Sustainable finance and investing is an area of increasing interest to the financial community, and investors around the world increasingly use Environmental, Social and Governance (ESG) considerations and analysis as a practical method for ensuring they are investing in high quality companies and projects. With global sustainability challenges increasing and meaningful millennial participation in markets fully anticipated, trillions of dollars are beginning to shift into this new area. The battle for future financial performance and market share may well be won by those who respond best to this new investment paradigm shift.
Sustainable finance and investing as an investment philosophy and practice is still new. Sustainable investors and leaders are often those who “woke up” to ESG issues and concerns over the course of their careers. They also are now enjoying economic benefit from getting involved and actively solving these problems. There is a mindset change well underway, and related skillset demand is extremely high. Such skillsets include becoming multi-level systems thinkers, actively involving stakeholders in decisions, integrating ESG considerations into traditional models of valuation as well as having a long-term mindset and the courage to challenge traditional approaches.
ESG concerns are becoming a core part of the overall strategy plan for many financial institutions, public companies, private companies, venture capitalists and governments alike. Western financial institutions now are required to champion an ESG approach to win business; stock exchanges require public companies to report on ESG, and governments and investors around the world are increasingly establishing sustainable business incentives using ESG analytical methodologies.
Firms are divesting from unethical businesses, and investing in performing ESG engagement and stewardship with their clients on ESG issues and topics, while others are starting up completely new funds with novel focus on areas such as ‘Impact Investing’ and ‘Climate Tech VC’.
Companies and financial institutions that identify sustainability leaders, give them necessary training and opportunities, will be able to reach mandated sustainability and investment goals more quickly. They will be more successful through the current tumult, and make themselves more attractive to long-term investors and their clients.
In recent years, the interests of corporate stakeholders - including your current and prospective investors, employees, consumers, community members, policymakers, and NGOs/think tanks – when it comes to environmental, social and governance (ESG) issues has been rising rapidly. Parallel trends regarding climate change, economic and pandemic conditions, and issues of justice have only continued to intensify in focus. Consequently, companies are now compared and in an increasingly competitive landscape whereby environmental issues, societal challenges, as well as governance transparency demands require companies to mainstream sustainability into strategy planning and reporting. These trends surrounding ESG issues have made it clear that successful companies going forward will be those that can be evaluated on financial outcomes as well as other categories of societal impact.
At the same time, ESG issues provide investors and companies with value creation opportunities. Net flows into sustainable investments have skyrocketed in the past few years. In 2021, almost US$1T poured into sustainable investments across asset class, with calls for this amount to triple as soon as possible to meet ongoing societal goals such as the UN SDGs. As part of this unfolding trend, sustainable investing in public companies is at record levels across all global regions, and nearly 60% of ESG funds outperformed the wider market over the past decade while most active fund managers not considering ESG issues underperformed their benchmark indexes after fees.
Tremendous momentum is therefore facilitating a shift toward stakeholder capitalism as voluntary action and mandatory regulation are seen as necessary for solving urgent problems such as climate change, poverty, inequality, etc. Industry leaders are responding by incorporating ESG considerations into their corporate strategies, issuing comprehensive sustainability reports, expanding ESG disclosure in their annual reports, and developing and communicating their ESG commitments. Since July 2020, over 90% of companies in the S&P 500 have created annual ESG reports, making such reporting a standard.
Moreover, going forward most companies will be obligated to publish sustainability information. The EU’s Sustainable Finance Disclosure Regulation (SFDR), which came into force in March 2021, requires entities to make disclosures to their clients or investors, with required reporting now officially in place for all public companies in the EU over the next few years. In the U.S., the Securities and Exchange Commission (SEC) recently proposed requirements for companies to disclose information on climate-related risks, as well as GHG emissions, climate goals, and planning processes. In China, the State-owned Assets Supervision and Administration Commission is requiring all publicly listed stated-owned companies to report on ESG by 2023.
Corporate ESG performance is becoming a core indicator of a company’s ability to achieve and maintain long-term business success. Communicating sustainability strategies and ESG performance as a result has become a top priority for business leaders and all investors.
ESG reporting is an ideal and effective means of enabling companies to answer in a single document a wide variety of questions that stakeholders, including internal staff and future prospective employees may raise. Companies that can mitigate ESG risk and capture ESG value creation opportunities as well as communicate their ESG performance and plans well will be best positioned to excel during the ongoing transition to a more sustainable future.
Although the importance for companies to report their ESG is obvious, the process of ESG reporting can be challenging. Clear, concise, and consistent ESG metrics are an essential requirement for any stakeholder effort to measure a company’s impact on the natural and social ecosystems. The work of sustainability accounting frameworks to render precision and inter-operability is vital to this task. Yet the 50+ major global ESG frameworks/standards, and their 2,000+ local counterparts pose great challenges to companies both operating locally and/or globally.
WSFA has created the Certified Professional for ESG Reporting (CP/ESGR™) to provide systematic and advanced training and certification to corporate professionals involved in their organization’s ESG Reporting and/or sustainability transitions.
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