Sustainable Finance
Astrie Krisnawati, School of Economics and Business, Telkom University, Bandung, Indonesia
r 2026 Elsevier Inc. All rights are reserved, including those for text and data mining, AI training, and similar technologies.
Introduction 430
Sustainable Finance 430
ESG Concept 431
Green Finance and Climate Finance 431
Industrial Transformation 432
Conclusion 432
References 433
Abstract
Sustainable finance is the notion of implementing the ESG concept in the financial sector. It considers environmental (E), social (S),
and governance (G) factors in investments to be in accordance with sustainable principles. Environmental factors include low carbon,
circular economy, pollution avoidance, biodiversity preservation, and measures to adapt and mitigate climate change to comply with
environmentally friendly business. Social factors include initiatives to resolve social issues, such as inequality, inclusivity, and human
capital. Governance factors include management structure and employee relations. Sustainable finance is also close to some concepts,
such as green finance, green economy, and sustainable investment.
Key Points
The key points or the objectives that the discussion in this chapter will reach are:
• Providing readers with knowledge about sustainable finance and other relevant concepts.
• Informing readers about the importance of concerning with ESG aspects in current businesses.
• Contributing ideas for solving environmental and social problems and efforts to achieve Sustainable Development Goals
(SDGs).
Introduction
This chapter will discuss the terminology of sustainable finance. The discussion of sustainable finance explores the notion of
environmental, social, and governance (ESG) aspects as the key elements of responsible investment. Taking the ESG factors as a
serious consideration in making financial decisions is a significant effort to resolve environmental hazards, such as climate change
and carbon emissions. The discussion of sustainable finance in this chapter also includes the discussion of green investment, green
finance, green economy, and sustainability concepts.
The closest concept to sustainable finance is green finance. Green finance is the idea that the financial activities of businesses
must be environmentally friendly in terms of efforts to avoid environmental damage and provide benefits to the environment.
One of the crucial forms of green finance in current situations is climate finance. It is a necessary effort to encourage climate-
resilient development. Implementing sustainable finance in today’s modern business also requires innovations that adopt digital
technology in financial products. This has led to widespread industrial transformation.
Sustainable Finance
Concerns about sustainability and climate change have grown over the past decade in society. Consequently, in addition to
financial data, the evaluation of firms also considers non-financial data, such as environmental, social, and governance (ESG)
scores. As a result, corporations will also be ranked according to the degree of their ESG compliance (Czado et al., 2022).
Sustainable finance is a concept of implementing environmental, social, and governance (ESG) ideas in the financial sector. The
financial sector can greatly enhance finance and public knowledge of sustainability. The financial sector can play important roles in
addressing sustainability issues by sponsoring research and development on alternative energy sources or funding companies that
follow sustainable labor standards and fair labor practices (Bakken, 2021).
430 International Encyclopedia of Business Management, Volume 1 doi:10.1016/B978-0-443-13701-3.00104-3