Chapter 5: New Form of Finance Flashcards
Conventional Finance Includes these areas
Risk and Profitability
Sustainable Finance Includes these areas
Risk, Profitability and Sustainability
ESG Financial Reporting is… (3)
- Sustainable Finance
- Company Responsibility
- Investor Information
3 Finance Areas in Sustainable Finance
- Solidarity
- Social Responsibility
- Green
Solidarity Finance
and examples
Socially useful projects
Examples: Job placement, combat inadequate housing
Socially Responsible Finance
Reconciles financial, social and environment performance
Green Finance
and example
Environmentally-friendly projects
green bonds
Conventional Finance Outlook (2)
- Saving on most profitable project
- No consideration of social or environment
Green Financing Outlook (2)
- Savings into projects not harming environment
- Circular, efficient, clean economy
Impact Financing
Investments made to generate positive, measurable, social and environmental impact with a financial return
Impact Financing Targeted Returns
range of returns from below market to market rate, depending on investors’ strategic goals
Impact Financing Addresses these real world challenges (4)
- Sustainable agriculture
- renewable energy
- microfinance
- affordable and accessible basic services
Socially Responsible Investment (SRI) Funds breakdown (4)
- Financial Assets
- Portfolio Management
- Include ESG Criteria in decision making
- Financial objectives with sustainable development objectives
Impact Funds breakdown (4)
- economic projects
- Financial for ecological transition
- tangible results
- measurable/observable targets for positive impact
EU Action Plan Objective
Reorient capital flows towards sustainable investment to achieve sustainable and inclusive growth
EU Action plan risk management
Mainstreaming sustainability into risk management
EU Action Plan Vision
transparency and long-term vison in financial and economic activity
European Sustainable Finance System. Order (CSRD, Taxonomy and SFDR) from Top to Bottom
SFDR -> CSRD -> Taxonomy
Taxonomy is the ___ of the European Sustainable Finance System and becoming ____ in other regions
Heart
Mandatory
Green House Gas (GHG) activites (4)
- Industries
- Power Generation
- Agriculture
- Transports
3 Scopes of Green House Gases
1 = Direct Impact
2 = Indirect Impact
3 = Indirect impact down value chain
GHG Scope 1: Direct Impact
Production Machinery, transport, furnaces, boilers
GHG Scope 2: Indirect Impact
Energy purchased by company (electricity, steam)
GHG Scope 3: Indirect Impact not in scope 1 and 2
upstream activities: raw materials Downstream: product end, employee and business travel
2 types of risks with Climate change
Physical and Transition
Physical Risks Category 1-2
- High
- Chronicle
Physical Risks Category 1: High
Climate related natural disasters
Physical Risks Category 2: Chronicles
Rising average temperature, seas level, precipitation changes
Physical Risks Category 1: High
Financial impact (3)
- micro level
- destruction of capital/business
- shocks in space/time
Physical Risks Category 2: Chronicles
Financial impact (3)
- macro level
- decline in productivity
- diffuse
Transition Risks Category 1-4
- Regulatory
- Technological
- Consumer Behaviour
- Transition Dynamic
Transition Risks Category 1: Regulatory
Climate policy risks, non compliance
Transition Risks Category 2: Technological
Tech innovation or lag
Transition Risks Category 3: Consumer behaviour
Change in consumer behaviour, distrust, reputation
Transition Risks Category 4:
Transition Dynamics
Interaction between players around the transition dynamic
How to Assess Planetary Bounds (3)
- 9 biospheres of Earth stability
- Not exceeding planet thresholds
- Scientific Data
Stakeholder Material Analysis Matrix
X-Axis
Y-Axis
Boxes
X-Axis : Company Relevance
Y-Axis : Relevance For Third Parties
Weak, Medium, Strong Boxes
