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Based on the book
THE BUSINESS CASE FOR SUSTAINABLE FINANCE
Iveta Cherneva (ed.), Routledge, 2012.
"As the evidence mounts of how important environmental, social, and governance issues can be to the fortunes of corporations, these factors are seen less as the weird preoccupation of an isolated minority and more as the central issues that they really are."
- MIKE SCOTT
INTRODUCTION
In the finance world, environmental, social, and governance (ESG) factors have, until recently, only been present in the softdomains of public relations, ethics, and philanthropy. Most existing academic literature on responsible and ethical investment addresses why finance should contribute to ESG needs, not why sustainable finance makes commercial sense. Thus, there is a need for sector-specific, topic-specific, and region-specific perspectives to build and present a systematic business case for sustainable finance. The aftermath of the economic crisis, marked by reflection and analysis of "what went wrong," offers an unprecedented opportunity to articulate this new rationale.
* In December 2010, the U.S. Department of Justice began proceedings against British Petroleum (BP) for economic and environmental damages following its April 2010 oil spill in the Gulf of Mexico. Among the counts was failure to utilize the safest drilling technology to monitor the condition of its wells.
* Throughout 2010 metro, train, and airline strikes over unsatisfactory working conditions in France, the United States, and Spain caused millions of dollars in losses.
* In September and October 2011, thousands of protesters came out on the streets of New York City and elsewhere under the motto "Occupy Wall Street," protesting corporate greed, Wall Street's way of operating, and social inequality.
* The year 2011 also brought floods, tsunamis, tornadoes, typhoons, and mudslides. A United Nations-backed report showed that environmental costs from global human activity equate to an estimated USD 6.6 trillion, or 11 percent of global GDP in 2008.1
* Finally, 2011 also witnessed the demise of the Greek financial system, which in turn posed a threat to the Eurozone as a whole.
The above events, though seemingly unrelated, illustrate how ESG issues and issues of financial sustainability pose both direct and indirect challenges to the global finance industry, which lies at the heart of the globalized and increasingly interrelated economy.
DEFINING ESG FACTORS AND SUSTAINABLE FINANCE
Numerous...