Sustainability. The End of Finance as It Was

Abstract

It is undeniable that sustainability has become one of the hottest discussion subjects nowadays. From a broad perspective, the ramifications of sustainability reach almost all of the social, political and economic territories. However, on many occasions, the lightness and superficiality with which the terms related to this matter are handled, make us think that it could be just a temporary fashion. We must not confuse ourselves. The truth is that we are witnessing profound changes in the socio-economic system that unveil a paradigm shift. If we set sustainability aside for a second, and we look from a pure socio-economic perspective, it becomes obvious that we are in the middle of an intergenerational wealth transfer of approximately 30 trillion dollars from the so-called baby boomers to their successors. And these successors - not just millennials, but people in their 30s to 40s - simply think about their economic decisions differently. Consequently, institutional investors have changed gears in their economic vision as well.It is the end of finance as it was. The consideration of ESG (Environmental, Social and Governance) factors into economic decisions represent not just a fashion but a new reality. A reality that represents a sizable challenge that, in many ways, comes along with plenty of controversy. In practice, it means the consideration of environmental, social and governance factors along with financial factors in the economic decision-making process. And this is a fundamental change for the financial and capital management world. The new paradigm confronts two main forces that can adopt different names, denominations or justifications: sustainability vs profitability, ESG vs financial performance, environment vs profit, etc. In sum, many economic operators may think that ESG factors could compromise financial performance. Is this reflection true or is it just an excuse for those anchored in certain patterns? This analysis will deep dive into the rational behind the current changes in the finance and capital markets to align its structures and business models to the new sustainable economy.10 keys explain the importance of sustainability in today’s finance world. These 10 macro trends are behind a profound transformation movement in the financial market setting up a new pace and new business patterns. It is the end of finance as it was.