Sustainable finance plays a key role in achieving net-zero emissions. The social dimension of ESG is becoming more important and if the Nordics want to continue to be at the front we need to invest more in social equality.
The Nordic Countries will become the most sustainable and integrated region in the world by 2030. Having a focus on sustainable financing is one of the prerequisites in order to achieve this ambition. That is the Nordic Vision.
Created by Nordic cooperation, the Nordic Vision speaks to what many researchers and organizations have realized in recent years: the financial sector holds enormous power in solving the deepening climate crisis by funnelling private money into carbon-neutral projects, research, and companies.
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ESG investments do better
Even before sustainable finance was the buzzword it is today, it was already on Nordic investors’ radar. “It means there is a better supply of capital for sustainable investments and it also means that measures are being taken in legislature and incentives to invest sustainably,” says Niina Aagaard, Head of Communications for the Nordic Council of Ministers and the Nordic Council.
“The ESG provides a framework for assessing the long-term and financial sustainability of investments, which means that they are often more profitable.”Niina Aagaard
Head of Communications for the Nordic Council
Often investments in ESG do better than conventional investments. One factor is that both institutional and industrial investors can manage risk better, which leads to lower capital costs, better returns, and long-term goodwill compared with unsustainable investments portfolios, explains Niina Aagaard.
“An organization that works with ESG at all levels is often also prosperous and functional. The ESG also provides a framework for assessing the long-term and financial sustainability of investments, which means that they are often more profitable,” she says.
ESG is becoming more comprehensive
Standards and regulations for ESG are beginning to emerge; including the EU taxonomy for sustainable investments and for investments that harm biodiversity in sensitive regions.
“The ESG is becoming more comprehensive and the social dimension with diversity, gender equality and labour law issues is becoming increasingly important. Access to capital will depend on how organizations can live up to this or not,” says Niina Aagaard.
The Nordics can lead by example
The Nordic region is further ahead than many other regions in the world in terms of renewable energy, energy conversion and gender equality. However, there is a need to invest significantly in both gender equality, social welfare and the energy transition. There, we can lead by example globally.
“A lot is happening when it comes to the green transition. We are already electrifying the steel and mining industry in the Nordic region. This development will lead to significant emission savings and the same solutions can be implemented on a global level. We work with renewable energy, energy storage, expanding our electricity networks and flexibility. However, we must become better at social equality. Especially with the new geopolitical situation in the world,” says Niina Aagaard.
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Sustainable finance in a nutshell:
Investment decisions that take into account the environmental, social, and governance factors of an economic activity or project.
The Helsinki-based financial institution has been financing green projects since 1990. Their ROI is Return on Impact focusing on growing Nordic green solutions on international markets generating positive environmental or climate-related results.
Stockholm-based Earthbanc has developed a vertically integrated platform that finances and sells carbon credit. They work to support the issuance of green digital bonds on blockchain to remove carbon and support farmers and communities to protect and plant trees.
The digital banking platform helps banks and businesses drive customer engagement, introduce green products, and make ESG strategies more robust.