Did you know that a million plastic bottles are thrown away every minute?

5 million single-use plastic bottles are discarded every year. That's according to data from the
United Nations, which indicate that if the current situation continues, by the year 2050 the
oceans will be home to more plastic than fish. In addition, other problems have negative effect
on our life such as fossil fuel, poverty, inequality, climate change etc.

Depletion of finite resources--fuels, soil, minerals, species, Over-use of renewable resources--

forests, fish & wildlife, fertility, public funds, Pollution air, water, soil, Inequity--economic,
political, social, gender, Species loss--endangered species and spaces

Therefore, if we want to meet the needs of the current world population and guarantee those of
future generations, it's vital to promote sustainability.

What is sustainability? what types are there? Why do countries, industries, cities etc. are
struggling for sustainable future?

Sustainability can be defined as the capacity to maintain or improve the state and availability of
desirable materials or conditions over the long term (Harrington, Lisa M. Butler, 2016).

Sustainable living practices help reduce pollution but also conserve natural resources like water
and energy. Businesses and people that care about sustainability are also less likely to encroach
upon the natural habitats of wild animals, thus helping protect the biodiversity of our planet.

Solutions: Cyclical material use--emulate natural cycles; 3 R’s, Safe reliable energy--
conservation, renewable energy, substitution, Life-based interests--health, creativity,
communication, coordination, appreciation, learning, intellectual and spiritual development

When did this imbalance begin? When did we arrive at the point where human activity became
the top driver of the destruction of our planet?

How long has the concept of sustainability been around? We take travel back in time to
discovery the history of sustainability.

The history of sustainability back to early human civilizations, where society would flourish,
followed by a sustainability crisis that was either successfully resolved or led to its decline.

Very early civilizations were hunter-gatherers who moved around to where they could find food
and water, they would take what they could from the land and then move on. There was no
guarantee of food or water, so it was a precarious existence.

Between 8000 and 10,000 years ago, groups of people found a more permanent solution through
agriculture, setting up farms to produce their local food supply. This resulted in the depletion of
critical resources (water and soil for example) and they would be forced to move onto another
area.

The Industrial Revolution in the 18th and 19th centuries led to significant technological
advances, including the discovery of fossil fuel and coal to power engines and later to generate
electricity. These technological advances led to an exponential increase in human consumption
of non-renewable resources.

Advances in medicine contributed to increased populations through increased life expectancy,

improved fertility, and reduced infant and child mortality rates resulting in over-population.
Between 1650 and 1800, the world population doubled from about 500 million to 1 billion
people, and between 1650 to 1810.

During the 19th century, ecologists, botanists and enlightened political economists such as
the Reverend Thomas Malthus warned of the environmental and social impacts of industry on
civilizations and the world. Due to over population, more people faced poverty and starvation

In the 1950s, after World War II and the great depression, developed nations began to grow
sharply. Concerned environmental groups warned of the costs associated with many modern
benefits and innovations such as plastics, chemicals, synthetics, nuclear energy, pesticides,
synthetic fertilizers, and the increasing use of fossil fuels on the environment and rural wildlife.
In the 1970s, environmentalists predicted the peak in oil production given the concerns with
pollution, the population explosion, consumerism, and the depletion of finite resources.

By the late 20th century, the world was facing significant environmental problems. The energy
crisis in the 1970s alerted the world as to how reliant it had become on non-renewable resources.
In developing countries, people faced poverty and starvation and regarded development as
essential to raise their standards of living while developed counties were concerned with the
over-usage of resources.

Due to this many of the businesses initiated some activities to save the planet.

Today, the world population increased significantly from 1 billion to 7.7 billion. And also the
crises, environmental damage, climate change effect our life.

At this level, financial institutes avoid lending or investing their money into businesses that can potentially
lead to negative outcomes for society. It can include businesses that produce tobacco, are involved in
human rights violations, gambling, cause harm to animals or the environment, etc.

In the case of sustainable impact investing, banks primarily decide to finance a business based on both
sustainability and profit (a win-win!). It includes investments in sectors like carbon reduction and other
renewable energy projects, poverty reduction, waste reduction, and so on.

In level three, we have impact-first investments in which banks start prioritizing social and environmental
interests over profit. it is a step ahead of simply avoiding harm and managing risks.
level four, in which financial generosity is to the next level. In sustainable philanthropy, profit not only
takes a back seat but is completely disregarded for social and environmental good.

It isn’t very easy to determine on which level our financial institutes are at right now. After all, while banks
make investments in an alternative energy source, at the same time, it also invests in fossil fuel. This
means, banks often make investment decisions that have a positive or negative impact. It makes
determining the position of an individual bank on the spectrum quite challenging.

Equity: Provider takes most junior equity position: common equity in structures that incorporate
preferred equity classes

Grants: Provider covers a set amount of first loss

Guarantee: Provider covers a set amount of first loss. Similar to the grant, except the guarantee has a
cost

Subordinated debt: Provider takes most junior debt position in a company

GUARANTEES

Parties: three parties involved in a guarantee: creditor, debtor and guarantor.

Liability: Basic liability of payment of debt falls on the debtor. If he fails to pay then responsibility falls
on the guarantor.
Interest: Creditor and debtor has interest in the contract but guarantor has no interest in the contract.

When Equity financing is preferred

Startup/entrepreneur: Banks will not provide Loans due to high risk of start-up failures, lack of collateral,
credit record etc. Large corporation: cheaper to sell shares than to pay Loan Interest

EQUITY FINANCING

Advantages

It's less risky than a loan because you don't have to pay it back, and it's a good option if you can't afford
to take on debt

You tap into the investor's network, which may add more credibility to your business

Investors take a long-term view, and most don't expect a return on their investment immediately.

You won't have to channel profits into loan repayment.

You'll have more cash on hand for expanding the business.

There's no requirement to pay back the investment if the business fails.

 

Disadvantages

It may require returns that could be more than the rate you would pay for a bank loan.

The investor will require some ownership of your company and a percentage of the profits. You may
not want to give up this kind of control.

You will have to consult with investors before making big (or even routine) decisions -- and you may
disagree with your investors.

In the case of irreconcilable disagreements with investors, you may need to cash in your portion of the
business and allow the investors to run the company without you. 

It takes time and effort to find the right investor for your company. 

DEBT FINANCING

The business relationship with a debt investor is very different than with an equity investor-- and
requires no need to give up a part of your company. But if you take on too much debt, it's a move that
can stifle growth.

Advantages

The bank or lending institution (such as the Small Business Administration) has no say in the way you
run your company and does not have any ownership in your business.

The business relationship ends once the money is paid back.

The interest on the loan is tax deductible.

Loans can be short term or long term.

Principal and interest are known figures you can plan in a budget (provided that you don't take a
variable rate loan).

Disadvantages

Money must paid back within a fixed amount of time. 

If you rely too much on debt and have cash flow problems, you will have trouble paying the loan back.

If you carry too much debt you will be seen as "high risk" by potential investors – which will limit your
ability to raise capital by equity financing in the future.

Debt financing can leave the business vulnerable during hard times when sales take a dip.

Debt can make it difficult for a business to grow because of the high cost of repaying the loan.
Assets of the business can be held as collateral to the lender. And the owner of the company is often
required to personally guarantee repayment of the loan.

Most businesses opt for a blend of both equity and debt financing to meet their needs when expanding
a business. The two forms of financing together can work well to reduce the downsides of each. The
right ratio will vary according to your type of business, cash flow, profits and the amount of money you
need to expand your business.

Equity - ownership in the business  majority shares provide control of the company

Equity is used to finance new business (for startups) or major purchases (for publicly traded companies)

When Equity financing is preferred

Startup/entrepreneur: Banks will not provide Loans due to high risk of start-up failures, lack of collateral,
credit record etc.

Large corporation: cheaper to sell shares than to pay Loan Interest

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Equity, Debt and Guarantees

Financial assets: securities (stocks and bonds), derivative contracts, and currencies.

Real assets: real estate, equipment, commodities, and other physical assets.

Pillar 1: Definition: Use of proceeds

A use of proceeds statement is a brief document that describes how a firm seeking more funding
intends to spend the cash. In other words, the paper gives the reader an idea of what elements of the
business the corporation will invest in.

Pillar 2: Selection: Process for project evaluation

Project evaluation is a step-by-step process of gathering, documenting, and arranging data on project
outcome. The achievement of the entire project compared to its aims determines success or failure.

Pillar 3: Traceability: Management of proceeds

A tool used in the sustainable finance market to ensure and verify sustainability claims linked with
commodities and goods, assuring good behavior and respect for people and the environment all along
the supply chain.

Pillar 4: Transparency: Monitoring and reporting

Transparent Monitoring (TM) methods refer to datasets, tools, and portals, among other things, that
assist nations’ needs, such as in the land-use sector, by supplying complementary data to what their
monitoring systems prescribe.

Pillar 5: Verification: Assurance through external review

The activity of reviewing an organization’s performance based on the contents of its sustainability
reports is referred to as external assurance in sustainable finance market reports.