The news cycle for the past few years has exposed the global population to an impressively worrying series of natural disasters that showcased the terrible impact of climate change. We have witnessed unprecedented heatwaves which shattered temperature records in Europe over the past few summers, bushfires which ravaged Australia destroying homes, habitats and causing significant loss of human and animal lives and hurricanes, such as Dorian, which struck the Bahamas and south-eastern US in August-September 2019, attributed to the warming of ocean water.
Suddenly as political leadership came to appreciate that ignoring climate change has a significant cost and in parallel, a new generation of consumers became more aware that their choices impacted the world they lived in, sustainability concerns shot up to the top of the global agenda.
A Eurobarometer survey focused on climate change had found that nearly nine in 10 Europeans agree that tackling climate change and environmental issues should be a priority to improve public health. Interestingly, close to six in 10 respondents think that business and industry are responsible for tackling climate change.
Consequently, sustainability concerns are fundamentally reshaping the way we do business. Michael Bianchi, Chairperson of the Malta Institute of Accountants’ Sustainable Finance Committee, sees three immediate impacts of this change in approach.
Companies that have truly taken a sustainable path over the past years are now bearing the financial fruit of cost savings and business growth
First, customer demands are changing. These demands could relate to decisions taken by consumers on which products to purchase, with considerations such as whether the products were ethically sourced, their environmental impact, and the company’s efforts at fighting climate change.
Second, the talent pool is changing on similar lines. At a time when companies are struggling to fill up their vacancies, it is an employees’ market, and the latter, given a wider choice, are opting more than ever to consider their employer’s green credentials rather than solely basing their choice on the remuneration package.
Thirdly, financing. The European Union has been pushing a stream of legislation which aims to redirect capital flows towards sustainable investments and ensure that financial institutions integrate environmental, social and governance factors into their decision-making processes. This includes encouraging banks to provide more financing to sustainable companies and projects. The EU has even set up a framework for the classification of sustainable economic activities (known as the EU Taxonomy) to provide clarity and transparency on what qualifies as environmentally sustainable investments. Thus, access to finance will also depend on a firm’s ESG credentials.
“These three factors therefore are pushing companies to rethink the way they approach sustainability. Rather than considering it on its own steam, this needs to be part and parcel of the company’s overall corporate strategy,” Bianchi explains. On the positive side he highlights research findings which suggest that companies that have truly taken a sustainable path over the past years – as opposed to adapting it as a marketing ploy or simply as a tick-the-box regulatory exercise – are now bearing the financial fruit of cost savings and business growth.
In this latter context, sustainable finance is one of a number of industry fundamentals which is explored in the recently-launched Financial Services Strategy for Malta. The Strategy explores a number of potential areas of impact, particularly in terms of sustainable finance, building on efforts already made by entities such as FinanceMalta which is collaborating with local and international stakeholders to make the most of the opportunities for further development of financial instruments supporting sustainability for specific niche markets.
Bianchi will be leading one of the panels at the upcoming MIA Biennial Conference 2023, which will specifically focus on sustainability, showcasing how adopting sustainable practices not only aligns with ethical considerations but also offers better shareholder value, contributing to long-term success and resilience in a rapidly changing business landscape.
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