Promoting sustainable development towards sustainable financing

Promoting sustainable development towards sustainable financing

GENTIANA HALIMI - Financial Institutions Department Senior Specialist, Banka Kombëtare Tregtare Kosovë

Nowadays, the topic of sustainable finance has been evident in many countries due it its importance on environmental, social, and governance (ESG) processes. Sustainable finance in the European Union context is understood as finance to support the long-term economic growth by reducing pressure on the environment and considering social and governance aspects[1]. From the UN perspective, sustainable finance contributes directly and indirectly to the delivery of Sustainable Development Goals (SDGs).

Sustainable Finance topic most of the time is related to ESG process. By prioritizing ESG sustainable finance creates value through shaping the agenda of governments, regulators, the financial and non-financial organizations to ensure the economic efficiency of the country. Furthermore, such assessments are done by considering the interactions with the environment/ ecological system, considering the social element by promoting social wellbeing, and governance factor through policy and decision making. ESG acronym can be further explained as:

- Environmental, which is crucial for healthy living by responding fast through climate change, gas emission, green products, and renewable energy.

- Social, an element that outlines complex issues related to employees, data privacy, cultural diversity, and social justice.

- Governance that implies good corporate and good governance with the rules, processes that a country/company runs to make decisions.

The ESG performance creates comparative advantages that result in value creation and risk reduction for the country/company/institution if such criteria are integrated.

Sustainable Financing for developing countries may be a challenge for many reasons such as; lack of foreign investments, unfavorable business environment, weak institutions, therefore by providing a business-friendly environment, encouraging business activity, and improving/upgrading the accountability of institutions may play an important role to mobilize sustainable finance.

Developing Countries may benefit from sustainable finance by achieving better performance through building a suitable ESG framework. Creating such a framework in place helps the country/ company/institution to manage the ESG aspects that potentially result in longterm growth. The three components of ESG have an impact on smoother operations and market enthusiasm which produce positive results beyond a good financial performance.

Kosovo, as a developing country, must promote sustainable development, by focusing on sustainable financing and creating an ESG framework that will have an impact in the long run for the economy and the country itself.