What does the term "sustainable finance" primarily focus on?

The term "sustainable finance" primarily focuses on incorporating environmental, social, and governance (ESG) factors into financial decisions. This approach emphasizes that financial activities should not only pursue economic returns but also consider the long-term impacts on society and the environment. By integrating ESG criteria, sustainable finance aims to promote investments that contribute positively to societal goals while managing risks and opportunities that may arise from environmental and social factors.

This focus on a broader set of considerations reflects a shift in how financial success is measured, moving beyond mere profit maximization for shareholders to include aspects that affect the health of economies, communities, and ecosystems. Sustainable finance encourages the investment in projects and companies that are aligned with sustainable development goals, which is increasingly recognized as essential for the resilience and stability of financial markets in the long term.