Investment banking is a rewarding way in which corporations and individuals can raise funds. Investment banking helps to bridge the gap between the parties who are seeking funds and investors who are in search of profitable avenues where they can invest their money. Not only this, but investment bankers also advise you on the most profitable investment tools that will reap you the best benefits.
However, investment decisions these days are made on more than just the basis of which avenue will provide the most profitable income. Investment decisions are made based on ESG (Environmental, Social, and Governance) conditions which help to determine how a company will utilise the opportunities and manage the risk that arises on these three fronts.
In this article, we will understand the role of money market funds in supporting sustainability and how an investment banking course can help an individual gain a boost in his career as an investment banker. Read on to find out.
Environmental, Social, and Governance - The 3 Facets of Sustainable Finance
Before we delve deeper, we need to understand what sustainable finance is. Sustainable finance is the process of deciding on financial investments while considering ESG factors. This helps ensure that investment decisions do not negatively impact the environment or society and maintain good governance in the long run.
Sustainable finance maintains some regulations to make investment decisions based on ESG (Environmental, Social, and Governance) considerations. During ESG investing, investors stress the fact that the companies that they invest in are socially responsible, do not pose any threat to the environment, and are led by managers who are accountable. The three factors are explained below:
Businesses should be aware that the practices they perform should not pose any threat to the environment. Such issues may include problems like improper waste disposal, pollution, energy use, climate change, improper treatment of wildlife, degradation of natural resources, and so on. ESG considerations help to evaluate the risks that a company’s practices might cause to the environment and suggest how the risk can be mitigated.
The way a company treats its employees speaks volumes about its culture. Investors also look forward to socially responsible investing, which means investing in companies that fight against stigmas like discrimination based on caste, sex, and colour, and promote ethics like inclusion, diversity, and social justice.
Good governance is another facet of ESG. Investors seek to invest in companies that have fair practices like transparency in accounting methods, accountability to shareholders, and integrity.
Therefore, from investing in projects that put renewable energy to use or curbing the use of plastic to combatting discrimination and promoting inclusion simply by having more female employees on board, companies can embrace ESG practices effectively!
How does Investment Banking Contribute to Sustainable Finance?
There are countries whose domestic resources are not enough to meet their development goals. Through investment banking, investors can chip into their growth while also earning a certain amount as a return which will be passed on to the clients. However, as has been mentioned above, investments should be decided in a socially responsible manner.
A number of ESG assets, such as green bonds, social bonds, sustainability bonds, etc., are gaining prominence. Green bonds are instruments made available to corporations that they can use to fund projects like carbon-neutral projects or projects related to water and sanitation. These projects will have a positive impact on the environment as well as society, thereby adhering to ESG norms.
Advantages of ESG Investing
Money markets are embracing ESG factors to ensure the sustainability of investments. By now, we already know that ESG investing is good both for your pocket as well as for the planet.
Some of the primary benefits of ESG investing are listed below:
- ESG investing helps to reduce the risk for the investors: ESG helps investors in effective risk management. Investors who invest in ESG assets usually refrain from investing in irresponsible companies with questionable practices. If a company has poor practices, it is evident that the price of the stocks can go down considerably when they are ready to be sold.
By avoiding such companies, investors can avert the risk of losing money and earn better returns by making the right investment choices. Businesses that are committed to ESG practices adhere to government regulations. Therefore, they have great reputations and are less likely to follow dubious practices.
- Cost-effective for the companies: Companies that adhere to sustainable and socially responsible practices are less likely to make exorbitant expenses like huge advertisement campaigns or investing in luxury items. For instance, companies can invest in renewable energy, which can reduce the consumption of energy and lower operating cost.
- Diverse portfolio: When investing in ESG, investors collaborate with companies that work in different environmental and social sectors. This results in the portfolio diversification of the investors.
ESG investments help to instil a sense of satisfaction and purpose among a company’s employees and help to boost overall productivity. Therefore, ESG investing creates a win-win situation for both the investors as well as the companies!
Are you willing to pursue a career as an investment banker? Having a certification can help you validate your skills in the given field. If you are willing to establish a career as an investment banker, an investment banking course from Imarticus might be of immense help to you.
This certification course, offered by Imarticus in partnership with Academy-Euronext Group, will prepare you for the job market by teaching you the relevant skills. The course in investment banking will begin with teaching the basics of financial markets and move forward to components like trade life cycle, risk management, etc.
Alongside the theoretical knowledge that is made available through live interactive modules, learners also get to implement their learnings through real-world case studies and projects. This 150-hour-long investment banking course from Imarticus will equip you with the right set of skills that will open up a plethora of new career opportunities for you.