Future of Sustainable Development:The Concept:Sustainabledevelopment is termed as development that meets the needs of the presentwithout compromising the ability of future generations to meet their own needs.1 Thereare three core fundamentals we have to consider when we are trying to achieveSustainable development: Economic growth, Social inclusion and Environmentalprotection. They stay interweaved into the social structure of the community welive in and are crucial for the well-being of each individual stake holder.
Sustainabledevelopment comprises of two main concepts:1. Theconcept of ‘needs’ which talks about the basic needs of the world’s populationand the focal priority given particularly to the essential needs of the world’spoor.2. theidea of limitations imposed by the current state of technology and socialorganization on the environment’s ability to meet present and future needs.2Why Sustainable development isimportant?Eventhough the Earth is a single entity we live in clusters of multipleclosely-knit communities where everyone is dependent on each other and thelimited resources our Earth motherland has to offer. Each community, eachcountry is invested in its own struggle to survive and prosper with more orless no regard for its impact on others.
Some among us consume the resources atan exuberant rate leaving very little for the future generations and the restof us, much larger in size, do it a slow pace and have to subject themselves toconditions of hunger, squalor, disease,and even early death.Fortunately,we can see a lot of progress being made towards minimizing the gap andnormalizing the pattern of consumption of resources in the recent years.Children being born today expect to live longer than their predecessors and bebetter educated. In many parts of the world, a new-born expects to attain a higherstandard of living in a wider sense. Any measures taken towards such a progressprovides us with hope as we contemplate the improvements still needed to make ourbiosphere a safer and sounder home for us and for those who are to come.
Theincreasing population and production has put pressure on the system to demandan increase in the scale and complexity of our requirements for natural. Thereare thresholds to our rewarding yet finely balanced Nature that cannot becrossed without pushing the boundaries which challenge the basic integrity ofthe system. Today as we are closing on many of these thresholds, we must beever more careful about not risking endangering the survival of our and otherspecies on the planet. Moreover, the rate at which the resources are beingdepleted due to varied consumption gives us little time to respond tounexpected changes and effects in the environment.Impact of environmental pressures onthe world economy:Theenvironmental difficulties we know and that confront us are not new, but wehave only recently begun to understand their complexity.
Previously, our mainconcerns always used to hover around the effects of development on theenvironment. Today, we need to be equally concerned about how environmentaldegradation can be detrimental to economic development. Environmentaldegradation further leads to the erosion of the potential of development. Thiscan be connected together if we refer back to the environmental and developmentcrises of the 1980’s.New approach to Environment andSustainable Development:Therehas been precedence which showcases the inability of development assistance to contributeto sustainable development and in some cases even detracted from it.
The narroweconomic criteria basis which lending to promote agriculture, forestry,fishing, and energy has usually been made take little account of environmentaleffects. For instance, the case of chemical-dependent agriculture versusregenerative agriculture. It is important therefore that there should be aqualitative as well as a quantitative improvement in selecting criteria forfinancing and lending towards development.
Ithas been identified that the financial sector plays an important part inpromoting sustainable development. Momentum around the role of the financialsector in supporting sustainable development and addressing climate change hasbeen generated by the various agencies around the world namely G20, and furtherstrengthened by the Financial Stability Board and the Paris Agreement and theassociated NDCs. The investment decisions by the market makers in the Financialmarkets can heavily influence shift in developments in the real economy. As weknow how crucial the global need for a low-carbon economy is to avoid and avertdisastrous consequences of climate change and as we have identified the urgencyfor economic development to be sustainable, it is clear and evident that financialmarkets play an integral role to drive investments to climate-friendly andgreen projects which supports the move towards a more sustainable future. Asprivate financial institutions are majorly influenced by the economic sectorsthrough their lending and investment practices, it suffices them to work profuselyon their mutual impactful relationship with sustainability: investments aredirectly or indirectly affected by climate change and other negative environmentalexternalities. By investing in energy efficiency, renewable energy, cleantechnology, and smart solutions for waste and water treatment, in the transportand infrastructure sectors financialinstruments can leverage sustainable growth.
A positive correlation betweeninvestments managed according to sustainability criteria and their financialperformance can be found according to some studies.3Green Financing and Green Bonds:Greenfinance refers to any financial instrument or investments issued under contractto a firm, facility, person, project or agency, public or private, in exchangefor the delivery of positive environmental externalities that are real,verified and additional to business as usual.4Greenbonds are regular bonds with one distinguishing feature: proceeds are earmarkedfor projects with environmental benefits, primarily climate change mitigationand adaptation. Thegreen bond market emerged in 2007- 2008 with bonds issued by the World Bank andEuropean Investment Bank. From 2007-2012, the market mainly featureddevelopment banks such as the EIB, IFC and World Bank. 2013 saw the first bondissued by a corporate entity which spurred more active participation fromprivate sector issuers including corporates and commercial banks.Climatechange is an overarching challenge consistently facing sustainable development.Climate change mitigation and adaptation is a huge challenge for infrastructureprojects.
Even if we underestimate climate change predictions, improvinginfrastructure to adapt to more extreme weather could cost an extra USD150bnper year by 2025. If temperatures continue to rise beyond the 2 degreesCelsius trajectory previously predicted, the adaptation costs rise dramaticallyto the tune of USD6.2tn. The period to 2020 is crucial for investing in greeninfrastructure.Inthe post financial crisis environment, the financial challenge of buildinggreen infrastructure cannot be met with public sector funds and bank financealone. This is where green bond initiatives undertaken by many countriesworldwide come into play.
Institutional investors have the capital (USD43tn) andare ready to invest in green and bonds are well suited to tap into such institutionalinvestors for infrastructure. This perfect synergy presents a goldenopportunity for the countries to focus its efforts of raising funds for greenfield projects by raising funds through Green bonds. Example: InsuranceIndustry commits to increasing the amount invested in climate-smart investmentsto ten times the current amount by 2020.5 The role of Green bonds in solvingenvironmental challenges in China:Whileemissions need to decrease, global infrastructure investment is expected to amountto RMB624tn (USD90tn) over the next 15 years – more than the entire currentinfrastructure stock. To facilitate the global transition to a low-carbon economy,an estimated RMB42- 9tn (USD6-7tn) in annual investment will be needed globallyover the next 15 years.6 Thegreen bond market has shown strong growth over the last 3 years, driven by stronginvestor demand which continues to outweigh supply. Globallygreen bond issuance for 2016 reached RMB552bn (USD80bn), with much of thisgrowth coming from Chinese issuers in the market. Green bond issuance fromChina increased in 2016 from almost zero to RMB238bn (USD36.
2bn), accountingfor 39% of global issuance in 2016. Economicand financial reforms provide potential to develop green bonds. The Chinesebond market has undergone major reform around market architecture when comparedto its inception stages, which has opened the opportunity to introduce greenbond issuance as a market innovation. The planned growth of the securitizationmarket provides another opportunity for green bonds. Way Forward:Financialflows will need to be redirected from brown investments to scale up greeninvestments that will not only mitigate climate change, but also to fostereconomic growth and job creation.
Most of the investments must come from theprivate sector as public spending is not sufficient, and is therefore importantto align the financial system with sustainable development. There is no doubtthat a high level of uncertainty clouds the future ahead. But one thing isclear – the shift to climate-consistent, green and, ultimately, more sustainablefinance now looks unstoppable.