Development of responsible investment within the concept of sustainable finance

Abstract

The strengthening of globalisation processes together with the climate change, the slowdown of the world economy, and growing income inequality have a profound impact on the transformation of the global economic and socio-political landscape and make the theme of sustainable development progressively more relevant. The environmental trend within the humancentered trajectory of civilization affects the financial sphere through the introduction of the Environmental, Social, and Governance (ESG) criteria in financial decision-making, creation of appropriate institutions and accumulation of financial resources, as well as transformation of financial systems’ functions. Against a background of these trends, responsible investment, or ESG investing, which takes into account environmental, social and managerial factors when choosing investment strategies, receives a significant boost. The aim of the research is to formulate new approaches to expanding responsible investment in the economy in the context of developing sustainable finance. The methodological basis of the research includes the concepts of sustainable development, finance and investment. The study uses a dialectical method to investigate the dynamics of economic phenomena, their interrelation and interdependence; and a system approach to the object of research implemented through graphic representation, grouping and comparison, analysis and synthesis. The paper summarises the theory and practice of responsible investment, examines the trends in the responsible investment market as well as its peculiarities. The authors prove the need to encourage responsible investment within the sustainable finance framework by removing information and structural restrictions. This will ensure the development of responsible investment tools and gain greater reputational advantages for companies. The authors produce recommendations for organising this process, in particular, to employ international practices and adopt the corresponding government policy.