Real Climate Impact: The Importance of ESG Financing

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Carbon emissions continue to trap our planet with heat, leading to climate change and global warming. In one way or another, be it in the food we eat, the clothes we wear, or how we get to work, we add to our individual carbon footprints through our daily activities. It’s one thing to make some changes to our lifestyle to reduce our carbon emissions output, but have you ever thought about the choices you make for your finances? Have you ever asked yourself where your money is going, or how well you actually know about the companies or corporations you’re investing in?

The lifestyle changes you’re choosing to make is truly admirable, however, how much of an impact are your eco-choices actually making towards fighting climate change? You may be reducing your carbon footprint from your lifestyle changes, but you may also be adding them back on by investing in companies that aren’t practicing your environmental values. 

What is Climate Financing and how does it combat climate change?

To create a real impact on combating climate change, we need to invest in the right places. Becoming carbon-neutral is going to require significant financial investments, but leaving the earth as it is will threaten jobs, health, and well-being of every human being, leading to much more expensive and undesirable outcomes. 

Climate Finance aids countries in reducing their greenhouse gasses output by funding green technology and renewable energy. It also helps communities in less developed countries stay resilient amidst the impacts caused by climate change. It is important to align our private investments to our climate goals. Climate financing means we invest in projects that are vital to the new green economy, and choose companies that work for the same goal. 

Reduce Emissions and Vulnerability

Investments are needed for countries, firms, and communities to transition to clean energy. Climate financing provides funds for climate mitigation and the development of climate-friendly energy resources that can reduce greenhouse gasses. Less developed countries and small islands are suffering the effects of climate change more evidently than others; they experience deeper droughts, more intense storms, unpredictable typhoons, rising sea levels, and stronger heat extremes. Climate financing helps these communities stand a greater chance at combating the impact of climate change by introducing and developing climate-resilient technology, energy resources, and infrastructure.

Transform Developing Countries 

One dollar spent in developing countries has a much greater impact on reducing greenhouse gasses than in any advanced economy. Developing countries only receive a fifth of clean energy investment despite being the major source of future carbon emissions. Emerging markets across Asia, Latin America, and Africa already account for two-thirds of the global population, and their carbon emissions are expected to grow by 5 gigatonnes in the next 2 decades. In order for the world to reach net-zero, we need to take the necessary steps to transform their energy systems, and 70% of the finances need to come from the private sector. 

Climate financing not only helps developing countries improve their disaster preparedness; it introduces them to sustainable methods and technology which enables them to become proactive players in our global fight against climate change.

Build Resilient Economies 

The development of green technology and renewable energy brings a wide array of social, economic, and environmental opportunities and benefits. Countries are moving towards reducing their carbon emissions, and firms that realize how critical a low-carbon global economy is to their business models also recognize that transitioning into clean energy is not only a commercial opportunity, but a planetary imperative. Investing in pioneering firms and new technologies accelerates the transition towards a green economy, unlocks new economic opportunities and jobs, and builds resilient economies around the world.

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