Financial Markets and Sustainability
By Chara Acheriotou
Senior Manager
K. Treppides & Co Ltd
Sustainability is the key to a better, healthier, and more viable future as it improves the quality of our lives with the use of natural resources which protect our ecosystem in general. By taking into consideration the three pillars of economic viability, environmental protection, and social well-being, we can preserve the future generations’ needs while, from a corporate perspective, the development of sustainable strategies can lead to a company’s longevity.
The sustainability of the economy has become one of the major priorities of the European Union (EU) while the European Securities and Markets Authority (ESMA) aims to support the environmental, social and governance (ESG) factors through financial markets by incorporating greener strategies to be followed in investments. More specifically, ESMA proceeded with a publication of a Roadmap outlining the three key priorities and planned actions for the specified period 2022-2024:
- tackling greenwashing and promoting transparency;
- building the capacities of National Competent Authorities and ESMA itself; and
- monitoring, assessing, and analysing ESG markets and risks.
Sustainable finance is of paramount importance as investing responsibly can reduce the social inequality and financial markets disruption, while in effect it can improve the financial performance. Consequently, structuring the investment portfolios by taking into consideration the ESG factors it may contribute to better risk management with long-run financial stability and investors profitability.
In consideration of the above, the investors can play a significant role towards the change expected from sustainable actions. Firstly, with the asset allocation, the institutional investors ought to decide where to invest their capital, something that may result to determinative impact on the markets and companies in general, whilst with their active ownership and through strong corporate governance mechanism they can influence the policies of the companies that they invest towards a greener and more sustainable approach.
In view of the above, the investors, to create an ethical trading strategy in forex, must consider choosing a provider that offers an eco-friendly platform by checking the vision and actions taken by the firm for the environmental protection. Not only the chosen provider but also the investor itself may contribute to the environment, by trading from home with sustainable electronics and green power, especially if there is daily trading activity. In addition, by taking long positions into eco-friendly nations currencies, the investor may indirectly contribute to the effort taken by the relevant countries to lower their carbon footprint and establish sustainable practices.
To achieve a long-term performance, an analysis must be performed to the country’s currency using the ESG factors and the country’s suitability scores. Such practice may contribute to a qualitative forex strategy that, from an environmental point of view, will be assigned according to the country’s committed actions in tackling the climate change. Other factors such as economic indicators as well as the political impact of a nation, may play significant role in implementing the relevant strategy of investment.
On the other hand, the financial service providers can be benefited by demonstrating sustainable finance practices as they may attract a wider audience of potential clients, employees, and investors, and at the same time creating new opportunities for partnerships. It is also notable that with greener strategies such entities will conserve potential resources and money, while it is also more likely to keep its employees satisfied due to a more environmentally friendly approach.
In a nutshell, you may think of sustainability as the principle that goes around and comes back around. It is inevitably proved that sustainable investment decisions lead to short-term and long-term financial performance, while sustainable businesses have positive impact to the society by operating with environmental consciousness. To preserve our future and assist in the global effort to fight climate change, sustainable finance may be another step towards the decrease of carbon footprint; we therefore need to alter our mindset and invest in eco-friendly practices and habits.
Even though investors can change their way of trading with a greener strategy, they must always take into consideration the risks associated with forex and be very aware of their financial safety by keeping a solid budget. The investors must always consider whether they understand how financial instruments work and if they can afford to take the high risk of losing their money.
K. Treppides & Co Ltd is the largest independent consulting firm in Cyprus with an established international presence and offices in Cyprus, United Kingdom, and Malta. The Company was established in 1985 and employs approximately 200 professionals. A full range of consulting, assurance, tax, accounting, and fund services are provided to groups, companies and investors operating internationally in a wide range of financial and business sectors. The Company has decades of proven track record of delivering high-quality services and solutions to our clients and through this experience, investors and businesses are guided and assisted during the establishment process and subsequent investment activity in Cyprus and internationally.
Contact Details:
Nicosia: Treppides Tower, Kafkasou 9, Aglantzia, CY 2112, Nicosia, Cyprus
Limassol: Andrea Kariolou 38, Ayios Athanasios, CY 4102, Limassol Cyprus
London:7 Milner Street, London SW3 2QA
Malta: Level 1, Somnium, Tower Road, Swatar, Birkirkara BKR 4012
