Sustainable finance explained: Why it matters and how your business can lead

Sustainable finance is the practice of aligning financial systems, investments and decision-making processes with the Sustainable Development Goals (SDGs) and global sustainability objectives. 

This approach involves mobilizing private and public capital to fund projects that advance inclusive growth outcomes, such as mitigating climate change, enhancing social equity and fostering sustainable economic growth.

Sustainable finance is a critical lever for achieving the Sustainable Development Goals (SDGs) by 2030, yet we remain significantly short of the necessary financing. Meeting these goals requires businesses to contribute to an annual investment of $5 trillion. 

By encouraging companies to set targets for SDG investment and finance, the UN Global Compact aims to tap into the $17 trillion in annual corporate investments and dramatically increase the volume and proportion of SDG-aligned investments and SDG-linked finance.

Here are three ways businesses can take action to align their financial strategies with global sustainability priorities.

The first step in sustainable finance is directing corporate investments toward projects that advance global sustainability. This could include infrastructure projects that reduce carbon emissions, enhance sustainable agriculture or promote gender equality. 

Start by collaborating with your finance team to identify and define SDG-aligned investments and set measurable targets. Decide what percentage of your investments will be aligned with the SDGs each year and establish a plan to increase this over time.

Transparency is key—implement systems to regularly measure and report on the impact of your investments. This will not only track progress but also demonstrate to stakeholders how your organization is contributing to the SDGs.

The second target focuses on integrating SDG criteria into your company’s financial decision-making process. This means ensuring that financial instruments, such as bonds or loans, actively support SDG-related projects. For example, issuing green bonds or sustainability-linked loans can directly fund initiatives that align with the SDGs.

Creating financial products linked to sustainability demonstrates your company’s commitment to responsible investment while attracting investors focused on environmental and social outcomes. Reporting on the use of funds and the results achieved enhances trust and accountability with stakeholders.

Achieving these ambitious targets requires collaboration across teams. While many sustainability initiatives are led by social impact professionals, engaging your finance team is critical. They bring the expertise needed to structure investments, design SDG-linked financial products and ensure alignment with global standards. Open discussions and shared goals between sustainability and finance teams can drive actionable progress.

Every step toward aligning your company’s financial strategies with the SDGs contributes to global progress. 

Together, businesses can lead the transformation toward a sustainable future.

Want to know more? Check out our action guide to explore more resources and strategies for making sustainable finance a reality, and consider Forward Faster to align your investments and financing strategies with the SDGs.