Sustainable Development and Participation Finance

Financial institutions need to integrate sustainability principles into the core of their business models in order to achieve sustainable development

MAGAZINE 16.07.2021, 02:45
Sustainable Development and Participation Finance

Sustainable development can be explained as a method of meeting the needs without compromising on meeting the needs of the future generations. Today, sustainability has become a key concept. With this concept, it is aimed to maintain our world’s efficiency without damaging its balance, resources, capacity and natural order. Sustainable development is a civic initiative aiming to protect the lives of future generations. Unfortunately, during the industrial revolution of the 19th century and the subsequent period of economic development, the desire to earn  and accumulate have created significant challenges.

Consumption of natural resources, pollution of the air, environment and seas, ignoring technological innovations, inequalities in income distribution and the continuation of the rapid increase in the world population have not taken sustainability and renewability into account. Since the 1980s, unsustainability has created a negative picture. Those who realized that the world's future is in jeopardy have initiated the Sustainable Development Goals (SDG) by collaborating globally under the leadership of the United Nations (UN). This agreement is comprised of 17 Sustainable Development Goals and 169 targets.

The agreement, titled "Transforming our World: the 2030 Agenda for Sustainable Development", has been adopted by 193 UN member states. The Agenda for Sustainable Development Goals aims to establish a better and more sustainable world for everyone by 2030 and aims to find solutions to poverty and achieve development for all. It also aims to aspire to achieve a healthy, high-quality and productive life, and equal education for all with the 17 Sustainable Development Goals, which are essential for the future of our globe.

According to the Green Bond report, sustainable green bond issues reached $650 billion by the end of 2020.

In order to implement the SDG, the role of stable financing has become crucial. Tackling the climate crisis, transition to a low-carbon economy and sustainable resources are valuable in global financial markets. Focus on critical themes such as renewable energy and resource efficiency, as well as environmental protection and rehabilitation, women employment and occupational health and safety increased. Green issuances, by financial institutions as well as issuances by the states and public institutions, have gained great importance in the global arena. According to the Green Bond report, sustainable green bond issues reached $650 billion by the end of 2020.

Participation finance, which is in line with sustainability, is a fair, ethical, participatory financial system that protects its stakeholders. Demand and trading volumes in participation finance instruments compatible with sustainable and responsible investment frameworks have been increasing, especially in Malaysia, Indonesia, Kenya, Kazakhstan, Abu Dhabi and Southeast Asian countries. While green Sukuk is the leading product in the participation finance sector, it is seen that companies and banks, as well as governments, tend to utilize this product in securing financing. Participation banks operating in Turkey also carry out exemplary projects in the area of sustainability and share the values they produce. To achieve sustainable development, financial institutions need to integrate sustainability principles at their core.

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