Green Financing and Organizational Sustainability Essay

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Analysis of the Field

The concept of sustainability has gained considerable popularity in the recent past. Sustainability generally refers to the continued existence of systems and processes. Traditionally, sustainability was discussed mainly in the context of ecology and biological systems, but today the concept has stretched to entirely every discipline including management, economics, business, politics, and culture. The increasing attention on sustainability has largely been informed by the danger posed by human activities on the environment. For instance, using fossil fuels depletes the ozone layer, which in turn causes climate change. Nonetheless, from what has been achieved so far, it is evident that sustainable development is a realisable endeavour (Bowdin et al., 2011). Sustainable development basically refers to a road map for attaining sustainability in any process or activity that utilises resources. It is development that fulfils present needs without shortening the capacity of future generations to fulfil their needs.

Organizational sustainability takes into account having the ability to keep the business going in having the capacity to address and satisfy the needs of prevailing consumers while taking into consideration the needs of future generations. It encompasses the creation of value that is incessant with the longstanding preservation and augmentation of financial, environmental, and social capital. Trends such as change in demography, globalization, as well as climate change in tandem with social inequity have given rise to a major challenge to the conventional business model with its emphasis on shareholder value. Aspects such as scandals within corporations as well as the financial crises have led to a significant loss of trust in business. As a result, corporations are experiencing pressures from consumers, investors, employees and also the government to show that they are espousing ethical as well as sustainable practices (Wales, 2013). There are significant issues and current dilemmas ensuing in the field of sustainability. These include the status of regional ties, for instance the occurrence of Brexit, climate change, corporate governance, big data and also the manner in which the sustainability development goals (SDGs) are changing corporate reporting (Slavin, 2016).

Research Topic: Green Financing

Background

One of the key topics in the area of sustainability in the present day setting is green finance. The growing scientific proof backing climate change and the role of human actions in greenhouse gas emissions has given rise to the issue coming to be a major element on the global agenda. Nations came to the agreement of restricting average temperature warming to 2 degrees Celsius, which is the verge past which hazardous climate change is projected. Numerous nations, together with China on their own accord dedicated to decrease or restrict their carbon emissions by 2020. In this regard, China has been substantially escalating its green tech and renewable sectors. Financing is a fundamental facilitator to these frequently large, capital intensive projects, and as a result banks in the nations continue to play a vital role in aiding China accomplish its pledges to decreased carbon intensity by 40 to 50 percent in 2020. This has given rise to China’s headship in green finance. Green finance is delineated as financial products and services, under the thoughtfulness of environmental factors all the way through the loaning decision making, ex-post monitoring and risk management procedures, rendered to endorse environmentally responsible investments and encourage low-carbon know-hows, projects, industries and businesses (Price Waterhouse Coopers, 2013).

Presently, banks in China seem to have made advancements in the area of green finance.

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The inclination of increasing lending done to green sectors and the deteriorating lending to industries that are energy intensive and produce high pollution levels given the indications that green finance is progressing in China. In particular, the prominent and leading corporations in the Chinese banking sector consider green finance as a prospective area for profitable growth in the long-term. In particular, green finance is perceived as a chance to expand the variety of services being offered by banks and creates the aspect that the organizations which act fast will have a competitive advantage over its rivals (Price Waterhouse Coopers, 2013). In the past year, the issuance of green bonds rose sharply by 120 percent to a total amount of $93.4 billion globally and this figure is projected to become more than twofold in the following year 2017 to approximately $206 million. From the global issuance, the issuers from China constituted more than 30 percent of the entire volume in the 2016 fiscal year as the nation hurries to improve its green investment. Moreover, it is projected that the demand from China will rise in the next few years as it takes into account the actuality of pollution following its fast industrial growth. In addition, green finance got major support from the 2015 Paris agreement, which was taken up and agreed to by approximately 200 countries which appears to move to renewable energy by 2050 (Moskowitz, 2017).

Current Theories and Areas of Debate

A key area of debate encompasses what the real influence on the environment is. With respect to green finance, there continues to be ambiguity in measuring environmental impact. There is contention on how the environmental benefits an advantages of an investment project can be examined and appraised. The questions is whether the solution lies in the conventional and normal application of a measuring component or in the improvised measuring of every project, taking into consideration that every project is financed in a different manner. It is imperative to take into account that every green bond issues is dissimilar and therefore the environmental impact will most likely be measured by projection and anticipations of the project, its implementations and outcomes (Revelli, 2017). The effort and determination necessitated to set up a green bond more often than not gives rise to the issuer asking for extra remuneration from the investor so as to pay for this particular cost. Another issue is that the pricing is intricate, owing to the fact that the investors are not ready at all times to compensate more for a project that could have been financed by a conventional bond. This can generate an inequity and disparity between demand and supply, but as it stands with responsible equity investment, green investors in the bond market are time and again equipped and willing to pay more because in this regard price is not their main concern (Revelli, 2017).

Another area of concern and contention with regard to green finance encompasses greenwashing. This can be delineated as the instance where a corporation or issuer will overstate and embellish their environmental qualifications. Despite the fact that a number of Green Bond Principles was unveiled in 2014 to motivate and embolden transparency, disclosure, and integrity within the market, there is a great need for addition effort and work to be undertaken so as to safeguard the promising industry’s repute and status. The aspect of disclosure brings to.....

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