Understanding sustainable finance

By Pia Holm, Senior Advisor – Sustainable Finance

This is part of a series of blogs from the JFSC team for World Investor Week 2024, an IOSCO initiative to advance investor education and protection.

Sustainable finance is the process of integrating environmental, social, and governance (ESG) factors into financial decision-making. While profit and economic growth remain important, the long-term sustainability of both people and the planet is also a key driver in today’s financial landscape.

Environmental considerations might include reducing greenhouse gas emissions, investing in renewable energy, or preserving biodiversity. Social considerations, such as promoting equality, diversity, and inclusion, are essential for fostering responsible and inclusive business practices. Governance involves aspects such as management structures, executive remuneration, and employee relations. Ensuring robust governance practices helps align a company's objectives with ESG factors.

However, with the rise of sustainable finance comes the risk of greenwashing, where businesses falsely portray themselves as more sustainable than they are. This misleads investors who seek to make positive impacts with their investments. To combat this, the Jersey Financial Services Commission has introduced anti-greenwashing codes of practice.

In March 2024, the Government of Jersey launched a public consultation on sustainable finance, with the response paper published in June 2024. The Government’s Sustainable Finance Action Plan, due in November 2024, will outline the next steps for Jersey’s sustainable finance initiatives.

Sustainable finance offers exciting opportunities to make a positive impact, but it requires careful consideration to avoid misleading claims. Investors need to stay informed and be vigilant when making investment decisions in this area.