Navigating the Green Finance Landscape: Tracking the Intersection of Finance and Sustainability

Since the introduction of fractional reserve banking in the 17th century, growth has underpinned the stability of both the modern financial system as well as society at large. With the advent of interest-bearing debt, loans were distributed, invested, and repaid, inducing capital formation on a previously unseen scale, in turn enabling unprecedented advancements in living standards and innovation. This process, however, had contradictory implications on the human economic condition, with market principles (effective demand, the productivity trap and capital investment) making perpetual growth a terminal necessity amongst capitalist economies once lending became systematically ingrained. Growth and commercial profitability became the basis of socio-economic development, with zero-growth tantamount to economic freefall and the disintegration of the monetary system itself. The evolution of international debt further compounded this structure, with many economies borrowing to sustain living standards, combat pandemics and support governments abroad, entrenching macroeconomic growth as obligatory for both debt-servicing and electoral prospects. 

This dynamic in turn instigated both ‘extensive growth’- ‘quantitative increases in labour, capital and land’- as well as ‘intensive growth’, encompassing the efficiency of existing capital markets and commercial activities. The latter phenomenon has proven especially critical following an urgent reappraisal of mankind’s ecological presence, with many seeking to reconcile perpetual economic growth with Earth’s finite material wealth and health. With climate change and its associated risks increasingly deemed an existential threat, regulatory, commercial and financial institutions face a profound challenge: how to abridge the international financial model with environmental realities. This ambition, pivotal to the future of humanity, commerce, finance and politics, is underscored by antagonistic viewpoints. Some urge the abandonment of growth as an economic and regulatory prerequisite, while others demand the preservation of growth whilst denying its ecological cost, presenting a dilemma that is poised to persist as a contentious and critical issue in the coming years.      

Accordingly, London Politica has sanctioned the Sustainable Finance Reporting Series (SFRS) to track the developing intersection between international finance and sustainability. By assessing the integration of sustainability within financial services, the SFRS aims to evaluate how the convergence of accounting standards, risk management and due diligence continue to interact with sustainability drives and regulations. Moreover, the series will analyse green finance strategies amongst some of the world’s most important emerging and developed capital markets, including Britain, the EU and India. Concluding the series, the SFRS will posit a refined understanding of financial materiality and ESG approaches within sustainable financial practice, and offer recommendations on how regulatory and financial institutions can best integrate environmental stewardship moving forward. While not exhaustive, these topics offer a comprehensive look at the challenges of prioritising environmental conservation within a growth-centric socio-economic model, providing both the exposition and insight conducive to effective policy-making and financial practice.