The rise of sustainable investment plans in Ireland

The recent announcement by leading global fund manager BlackRock stating that it plans to make sustainability a regular practice in investing is a clear sign sustainable investment is becoming a popular financial choice.

Larry Fink, the CEO of BlackRock explained that climate change is now a decisive factor in business’s long term development and points to sustainable investment plans as a clear option to deliver better results for customers. BlackRock plans to make sustainable investment accessible to all and remove the barriers for those interested in participating in such programs.

Sustainable finance incorporates green bonds, socially responsible investment plans (SRI), environmental, social and governance (ESG) factors, climate finance and performance bonds. Sustainable finance has become a focus in “Ireland for Finance”, a core strategy for the development of Ireland’s financial services industry to 2025.

Ireland delivered its first sovereign green bond during 2018 and investments in green energy and sustainability have continued to rise in recent years. Sean MacHale, the head of strategy, connectivity and growth at the Bank of Ireland Global Markets believes sustainable investment development is likely to continue growing. MacHale points to the year-on-year growth with some industry analysts suggesting sustainable investment could reach $50 trillion within the next two decades and one of the key drivers relating to this predicted growth is performance. Investments associated with high ESG scores have regularly outperformed other investment options.

Meeting the expectations of new investors

Many customers are now looking for investments that incorporate ESG as a core element of their plans. Demand for ESG-based investments is high and the range of products is developing as we gain a clearer idea of the benefits and impacts of ESG.

The Bank of Ireland created its €1 billion Sustainable Finance Fund in 2019, with a number of other funds being created in response to the growing demand for ESG. 

Many analysts believe more products are likely to be introduced this year and that current ESG products will become commonplace. ESG provides a great opportunity for financial professionals to add value and support clients in their future investment plans. MacHale highlights that sustainable linked loans are becoming more popular with corporate businesses in Ireland, where discounts are added to interest rates based on a number of sustainability measures. 

All of these investment changes are having an impact on higher education in Ireland. CD Smurft business school now offers an MSc in Renewable Energy and Environmental Finance, a postgraduate qualification that is becoming more popular with business and finance graduates. Sustainable finance has become an essential technique to manage a number of challenges in society. Sustainable finance has also become a vital asset within Ireland’s new plan for the financial services industry to 2025. The business school emphasises that if businesses are dedicated to the Paris Agreement and reaching net-zero by 250 then employees need to be trained in this area and investors will have clear expectations that this is happening. While the business course in Ireland is relatively new, other academics believe there is a need for similar courses across the nation, stressing the need for sustainability investment to be incorporated into all business courses and training.