SUSTAINABLE FINANCE (Encyclopedia)

The rational of sustainable finance stays in the achievement of sustainable development (a growth in which the needs of the current generation are satisfied without compromising the ability to create values for future generations). At company level, sustainable development (SD) can be identified with the so-called Corporate Social Responsibility (CSR), which is realised by maintaining an entrepreneurially responsible behaviour towards other economic agents with whom the company holds direct and indirect relations (the stakeholders). A sector where the implementation of CSR and the support of SD play a big role is the banking sector, whose activity is able to promote local growth, environmental protection, employment, and financial and social inclusion. Among all the possible CSR activities for the banking sector, ethical finance (or sustainable finance, or also alternative finance) is a potential expression. It represents the set of possible ways of managing funds for which the traditional referential parameters for evaluation (risk and performance) are supported by the use of social and environmental criteria that capture how specific investments reflect on the real economy. Sustainable finance builds on two principal dimensions. The former concerns Social Responsible Investments (SRI), namely all the activities based on projects with high social and economic values which often support organisations working in the field of international cooperation, the environment, and social services. Concretely, this dimension of alternative finance turns into an increase in the number of "ethical" investment opportunities, or into a reduction of investments in companies working in segments such as tobacco, alcohol, army, pornography, etc. So far, ethical funds represent small market shares and only a little part of the economic system. However, the interest of the system towards these forms of investments is growing. The increase in sustainable finance was essentially stimulated by three factors:
1. Companies observe that operating in a responsible manner may generate competitive advantages;
2. Climate change represents today an important challenge where the financial sector realises that it also has opportunities;
3. Managerial personnel in the financial area are aware of the implications of sustainable investment decisions and choose to incorporate CSR in their investment strategies. 
Another application of sustainable finance is microfinance, directed to the poorest groups of people. This instrument arose in order to collect credit and saving needs of people not otherwise bankable, or rationed from the traditional credit channels, for whom it would be impossible to provide collateral or returns from investments. One of the aims of ethical finance is thus evident: the promotion of the human person. Microcredit1 is an important part of the microfinance from which it differs in that it involves the supply of credit and not saving services. It consists of the credit grant to micro companies or single agents for very small amounts, without requiring any particular collateral. There are several benefits that may come out of this initiative, that can be summarised in the opportunity of generating a work income which assures in some cases the survival (food and medicines) of poor people, or in better cases their children’s education. In addition, it may turn into the reduction of cases of human exploitation and into a higher level of local wellbeing.
In the financial environment, characterised by the presence of speculative interests and the need to associate a markedly positive financial return on every operation, sustainable finance builds not only on criteria of economic vitality, but on those of social utility as well. The aim is to bring finance back to its original function of guarantor of savings, and of supporter of real economic growth. It is its duty to avoid investment only for the speculative purposes and to guarantee that savings management favours social equity as well as the respect and protection of the environment. These are instrumental steps to achieve sustainable development. According to the "Manifesto della Finanza Etica", the principles of sustainable finance can be summarised in the following points2:
- Credit grant in all its forms is a right (and it does not discriminate against gender, ethnicity, and salary); 
- Efficiency is considered as an element of ethical responsibility;
- Enrichment based only on the possession of money or on exclusively speculative operations is not legitimate;
- Finance is transparent;
- Not only members but money savers as well take part in the important choices of the company;
- Reference criteria for investment are environmental and social as well as economic;
- The brokers direct all the financial activity to sustainable finance principles (and they declare themselves liable to be monitored by money savers and guarantor institutions).
The consensus on sustainable finance has been growing over the last years and its inspiring principles assume more and more value in a reorganisation period such as the one we are going through. The current challenge of sustainable development requires financial operators to be strategic and organised in order to radically adjust the current attitude towards the environment, the human person, and society.
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1In December 1997, the United Nations approved a resolution (52/194) on the importance of microcredit as an instrument to reduce poverty.
2See the "Manifesto della Finanza Etica", Elisa Baldessone and Marco Ghiberti (Edited by), "L'Euro Solidale", EMI, pp. 20-22, 1998. The "Manifesto" was promoted in the convention "Verso una carta d’intenti per la finanza etica italiana", Firenze 1998.

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