Companies are now more mindful than ever of integrating environmental, social and governance (ESG) factors into their financial decision-making, as they should.
Sustainable finance, though a relatively new concept, is now at the heart of every major corporate agenda, and rightfully so. It emphasizes the importance of financial decisions that not only generate profits but also contribute to positive social and environmental outcomes, aspects previously overshadowed by the pursuit of profitability and shareholder value.
This shift has unlocked billions of dollars in funding and encouraged corporations to address societal and environmental challenges. Whether it involves transitioning to green energy, investing in green bonds, or promoting financial inclusion, each action compounds and propels the journey towards sustainable development.
Companies can leverage the UN’s 17 Sustainable Development Goals (SDGs) to identify opportunities and contribute to global sustainable development. For instance, fostering financial education among the younger generation aligns with goals such as quality education, gender equality, reduced inequalities, and sustainable communities.
A perfect fit
Initiatives aimed at fostering financial education among the younger generation hold the promise of driving social sustainability.
Social sustainability focuses on ensuring that investments support equitable growth, social cohesion, and human development. By prioritizing investments in projects that promote inclusive growth and social welfare, a financial education initiative aligns precisely with these objectives.
Inclusive, empowered and resilient societies
Financial education has an important role to play in ensuring and promoting financial inclusion. It can help individuals navigate the financial system and access financial services.
Financial education also helps in reducing poverty, social inequality and promoting financial stability in communities. It aids individuals in making better financial decisions that can lead to improved financial outcomes, such as higher savings, lower debt and greater wealth accumulation.
It can also help individuals avoid financial pitfalls, such as high-interest debt and fraudulent financial products.
Financial education campaigns have resulted in more informed decision-making, increased confidence, and improved well-being. A study by the World Bank found that countries with higher levels of financial literacy experienced higher levels of saving, investment, and economic growth.
Financial education initiatives can also contribute to improved mental health outcomes by reducing financial stress and promoting financial well-being. Individuals who experience improvements in financial well-being also report reduced stress and improved quality of life, as demonstrated by research published in the ‘Journal of Consumer Affairs’.
Strategic business driver
Companies should not view these social initiatives as mere philanthropy, but as strategic business drivers. Research indicates that the majority of consumers believe businesses should prioritize society’s interests alongside their own. However, only a small percentage of brands are perceived as meaningfully and positively impacting people’s lives.
Meaningful brands, as shown by research analyzing over 700 brands in 23 countries, outperform the stock market by 120 percent. The share prices of The top 25 companies on the Meaningful Brands Index (BMI) have consistently outpaced companies not perceived as meaningful by consumers since 2004.
To remain relevant to millennials and Gen Zers, businesses must urgently address these expectations by selecting causes that strategically align with their brand and business objectives. These generations are attuned to brands and companies that demonstrate a well-articulated and executed social purpose.
A win-win proposition
The integration of sustainable finance and financial education is a combination that holds immense potential for driving social sustainability. Building a foundation through financial education is a win-win proposition. It serves as a catalyst for social sustainability, empowers individuals, and contributes to more inclusive and resilient communities.
Embracing this approach not only benefits society and the environment but also presents opportunities for businesses to thrive in a landscape where purpose and impact are valued.