Green finance : an essential pillar for a sustainable future

The World Wild Fund for Nature (WWF), one of the world's most influential conservation organizations, defines these concepts and promotes their adoption worldwide.

     Climate change and biodiversity loss pose a major threat to financial stability and our global market system. Our economies depend on goods and services generated by nature, such as food, raw materials, pollination, water filtration and climate regulation. Yet thousands of billions of dollars are invested every year in activities that harm people and the planet. We urgently need to preserve our natural capital. We need to develop business models and investment portfolios that work with nature rather than against it. That’s why WWF works in green finance.

      WWF defines green finance as the link between financial systems and ecosystems. A prosperous, resilient economy that benefits people and communities depends on a healthy, living planet. The financial sector is an extremely powerful lever for change that can drive the transition to a fair, carbon-neutral and nature-positive economy. WWF's green finance strategy is based on two pillars: greening finance and financing green.

       Through the Greening Finance Initiative (GFRI) WWF conducts scientific research and works with governments, regulators, central banks, banks, investors and insurers, providing capacity building and tools to engage them in integrating environmental, social and governance (ESG) risks and opportunities into their investment, monetary policy and risk management decision-making processes ("greening finance").

       In addition, together with the private sector and financial institutions, WWF is working to increase the flow of finance into activities that have a positive impact on the environment and society ("financing green"), on the one hand by demonstrating the financial profitability of business models and investments that generate positive impacts for nature and communities (bankable nature solutions) and, on the other, by developing sustainable financial solutions (green financial solutions) to catalyze investment in businesses that support vital ecosystem services such as : clean air and water, food production and climate stability.
 
       The concept of "greening finance" thus goes beyond the purely financial aspect. It is an essential political and decision-making tool for directing financial flows towards projects with low environmental impact and high sustainability potential. This approach seeks to align financial objectives with sustainable development goals, thereby maximizing the positive impact on the environment while ensuring viable long-term financial returns.
Many practices are emerging to integrate the principles of Green Finance and Greening Finance. Standards and regulations are being introduced to encourage responsible investments, such as green bonds, low-carbon loans and socially responsible investment funds. These initiatives draw investors' attention to the opportunities offered by the transition to a green economy.

Green Finance in the World and in Madagascar

       According to available data, global investment in Green Finance is growing steadily. In 2021, green bonds reached a record volume of over $1,000 billion, demonstrating investors' growing interest in sustainable projects. In addition, assets under management in socially responsible investment funds exceeded $30,000 billion, reflecting growing demand for investments aligned with ESG (Environmental, Social and Governance) criteria.

      Green finance is booming. According to the Global Sustainable Investment Alliance (GSIA), sustainably managed assets reached almost $35.3 billion in 2020, an increase of 15% on the previous year. Institutional investors, pension funds and asset managers are increasingly recognizing the risks associated with environmental issues and incorporating ESG criteria into their investment strategies.

      In 2020, green bonds reached a record $270 billion, according to Climate Bonds Initiative. The Asian green bond market grew by 40% in 2020, reaching a total of $22 billion. According to GSIA, Europe accounts for the largest share of sustainable investments, followed by North America and Asia.

      Specific figures on green finance and the greening of finance in Madagascar are limited. However, initiatives such as the Global Environment Facility (GEF) and the Green Climate Fund (GCF) have invested in environmental projects in Madagascar, notably in forest preservation and the promotion of renewable energies.
 
Perspectives for Madagascar in Green Finance
       Madagascar, rich in biodiversity but facing major environmental challenges such as deforestation and loss of natural habitats, can benefit from Green Finance to promote sustainable development. By integrating Green Finance practices into its policies and investment projects, Madagascar can not only contribute to the preservation of its unique natural heritage, but also stimulate its economic growth in a sustainable manner.
 
       However, to realize these prospects, Madagascar needs to strengthen its financial infrastructure and develop financial instruments adapted to local needs. This also requires close collaboration between government, financial institutions, business and civil society to mobilize resources and implement effective projects.
      
Integration into Madagascar's national financial inclusion strategy
 
       Integrating Green Finance and Greening Finance into Madagascar's national financial inclusion strategy is essential to ensure inclusive and sustainable economic growth. By promoting access to financial services for all, particularly rural and vulnerable populations, while encouraging responsible financial practices, Madagascar can strengthen its economic and environmental resilience.
 
       Green Finance and Greening Finance are powerful levers for promoting sustainable economic development and tackling global environmental challenges. Madagascar, like many other countries, has the opportunity to leverage these concepts to shape a greener, more prosperous future for generations to come.