Sustainable banking is one of the financial trends we will see in the coming years. We now see this joint forecast for the International Monetary Fund and the World Bank. In fact, the latest investment modality is collapsing banks, and it is estimated that it has already moved almost 3 billion dollars worldwide.
Green financing is gaining ground in the investment sector: a trend that is growing steadily
Green finance and investing has experienced massive growth in recent years as concerns over climate change drive investment into sustainable businesses and funds. Sometimes called sustainable finance, green finance refers to the process of considering environmental factors when making investment decisions.
Globally, investment in clean energy and technologies hit $500 billion in 2022. Major banks have also mobilized over $1 trillion in green financing. Investor demand for sustainable options is surging as well.
Assets in green funds have doubled in just two years, topping $2.7 trillion in 2022. Investing ethically and sustainably is becoming mainstream. This growth has been driven by several factors. Climate change threats are becoming more apparent, forcing investors to account for environmental risks.
Government policies are also steering finance towards green industries to meet emissions targets. At the same time, opportunities in clean tech and renewable energy are accelerating. Forward-thinking investors understand the growth prospects in sustainable sectors.
Current green financing figures, historic: a weight that is counted in the trillions of dollars
A recent report by Corporate Knights shows that leading banks collectively facilitated over $1.1 trillion in green financing in 2021. Green financing refers to loans, investments and other financial services that support clean energy, sustainability initiatives, and environmental solutions.
The report analyzed the world’s 60 largest banks across North America, Europe, and Asia based on their green financing activity. It found that green loans, underwriting of green bonds, and financing for renewable energy projects surged compared to the previous year.
Europe led with over $500 billion in green financing, followed by North America and Asia. HSBC ranked first among the banks for the second year in a row, facilitating $118 billion in green financing.
Other top performers were BNP Paribas, Barclays, and Citigroup. The growth in green financing shows that major banks are aligning their lending and investment priorities with climate goals amid increasing pressure.
The skyrocketing trend of green financing: nearly $3 trillion for this shift
Clean energy investment is projected to reach $2.6 trillion globally in the 2020s according to a report by Bloomberg New Energy Finance (BNEF). This represents a significant increase from the $2.4 trillion invested in renewable energy sources like solar, wind, and hydropower over the last decade.
The growth in clean energy investment is being driven by several factors. Firstly, the costs of building and operating renewable energy projects continue to fall rapidly, making them increasingly competitive with fossil fuel power generation.
In many parts of the world, it is already cheaper to build new solar and wind farms than to operate existing coal plants. Secondly, government policies are playing a major role in incentivizing renewable energy deployment.
Countries around the world have implemented clean energy targets, subsidies, carbon pricing programs, and other mechanisms that encourage investment in low-carbon technologies. The Paris Agreement has also galvanized climate action by nearly 200 countries.
Thirdly, corporations are increasingly procuring clean energy through power purchase agreements to reduce their carbon footprints and lock in low electricity costs. Google, Apple, Amazon and other tech giants have been major drivers of corporate renewable energy adoption.
An investment that is capable of moving trillions is not the result of chance, nor even of such volatile trends as cryptocurrencies. What we have seen is how the financial sector is turning to sustainable banking as a result of international greening policies. In fact, this has been one of the most common demands of the United Nations, you will recall.