What is sustainable finance and why is it important?

The average global temperature has risen by 1 degree Celsius (1.7 Fahrenheit) since the end of the 19th century, and is expected to climb by another 0.5 degrees by 2050. It’s clear that climate change is no longer a concern for the future, and we all need to take action to avoid the consequences. And it goes beyond individual action.

As Sebastien Marchon, Rydoo’s CEO, puts it, “As citizens, we have a responsibility to overcome global warming, and as a CEO, I share that responsibility.”

More and more individuals are demanding that their governments take action, but also their companies. In 2024 alone, attracting and retaining talent was one of the reasons why businesses increased their sustainability strategies and investments by 85%. Today’s businesses and finance teams must step up, meeting stakeholder demands for transparent, effective environmental, social, and governance (ESG) practices.

Sustainable finance isn’t just a trendy term. It represents a shift in how investments are assessed and decisions are made. By integrating ESG criteria into their financial strategies, companies can better manage risks and capitalise on new opportunities, while also staying compliant with changing regulations. From green bonds financing renewable energy to impact investments targeting social change, sustainable finance is reshaping the financial landscape.

Today, understanding and adopting sustainable finance is no longer an option but a responsibility. Proactive organisations are positioned to lead in a changing industry, unlock value, and strengthen their future.

Sustainable finance is the practice of allocating capital to deliver both financial returns and positive ESG impact. It’s much more than just numbers and profits: it represents a commitment to the broader impact of investment decisions.

At Rydoo, it guides how we operate, helping us contribute to economic growth while maintaining strong commitments to environmental, social, and governance standards.

Today, understanding and adopting sustainable finance is no longer an option but a responsibility.

In essence, sustainable finance takes a thorough approach to investment, recognising that true value isn’t just immediate returns but creating a better, more sustainable world in the long run.

To further understand this, it’s important to define the three main pillars of sustainable finance: environmental, social, and governance (ESG).

At its core, ESG has two interconnected dimensions. First, it considers how a company impacts the outside world, its environment, society and governance practices. Second, it recognises how changes and challenges in these areas can affect the organisation’s operations, reputation and even its long-term survival.

This is why sustainable finance goes beyond the environment. By including governance and social factors, companies are encouraged to create a positive impact while managing risks that could threaten their future.

Environmental

This pillar evaluates how a company impacts the planet — its carbon footprint, energy consumption, waste management, conservation efforts, and biodiversity protection. In practice, businesses set science‑based targets to reduce greenhouse gas emissions and invest in renewable energy.

It’s not just about avoiding harm, but about actively having a good impact on the planet.

Sustainable finance takes a thorough approach to investment, recognising that true value isn’t just immediate returns but creating a better, more sustainable world in the long run.

Social

This social aspect examines the company’s relationships, focusing on how employees, customers, and communities are treated.

The main focus areas include diversity and inclusion, data protection, employee well-being, human rights, stakeholder engagement, and broader societal contributions.

Governance

The governance pillar of ESG standards looks at the structures and practices that guide a company’s operations and how it seeks to influence and affect decision-makers.

It covers shareholder rights, operational transparency, board diversity, and executive pay structures. It also considers the company’s stance on issues like bribery and political contributions and how it compensates partners in its ventures.

From individual investors to global banks and institutional funds, everyone in the finance world is pushing towards an ESG-driven approach. Ignoring this shift isn’t just risky, it’s short-sighted.

Today’s investors expect more than strong financials. They want transparency around environmental risks and clear evidence that companies have plans to manage them. ESG is no longer a bonus; it’s becoming a baseline.

Commitments like the Paris Agreement, the European Green Deal, and frameworks such as CSRD signal a wave of stricter sustainability reporting requirements. Non-compliant businesses risk reputational damage, weaker investor confidence, and even regulatory penalties.

Today’s investors expect transparency around environmental risks and clear evidence that companies have plans to manage them.

As Kevin Hagen, VP of ESG Strategy at Iron Mountain, said in a Harvard Extension School article: “Accounting functions need to add skills for gathering, managing, analysing, and reporting a whole new genre of business metrics, such as greenhouse gas emissions, gender pay gap results, and ethics and anti-corruption indicators.”

This shift may be challenging, but it also opens the door for finance teams to play a strategic role in driving sustainable growth.

For many executives, ESG and sustainable finance are new and uncharted territory. But what was once under the radar has now become a global priority. The numbers speak for themselves, with global ESG assets predicted to hit $40 trillion by 2030.

At the same time, regulations are catching up. With the European Green Deal aiming for carbon neutrality by 2050, new policies have been introduced, including the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD), which are reshaping how companies report and act on ESG-related data.

Sustainable finance is becoming the foundation for regulatory compliance, investor trust, and long-term business resilience.

These frameworks push finance leaders to adopt transparent, impact-driven investment strategies and ensure that sustainability is fully embedded into financial operations.

This shift also opens the door to new funding opportunities. From supranational institutions like the OECD and UNFCCC to grassroots crowdfunding platforms focused on clean technologies, there’s more capital available than ever before for enterprises willing to commit to ESG goals.

In short, sustainable finance matters now because it’s becoming the foundation for regulatory compliance, investor trust, and long-term business resilience.

Adopting sustainable finance practices doesn’t happen overnight. It’s a long-term commitment that requires clarity, consistency, and continuous learning, and it goes beyond strategy. It’s about embedding a culture within the company.

Sustainable principles should be adopted from the top down, so they can truly resonate with ESG-minded investors. However, for these principles to be meaningful, you must bring other people on board, such as employees and stakeholders. Engaging everyone across the company ensures sustainability isn’t just a leadership goal, but part of the company culture. And that takes time.

It’s a marathon, not a sprint.

Here’s a step-by-step path to help CFOs and finance leaders get started:

Understand the value of sustainable finance

Start by recognising the long-term benefits of ESG-driven practices beyond compliance.

Sustainable finance can build investor confidence, attract talent, and unlock access to capital. Framing these benefits clearly will help gain buy-in from executives, shareholders, employees, and customers.

Set a strategic roadmap

Create a clear, phased plan to transition toward fully sustainable finance operations.

This isn’t just about policies. It’s about embedding ESG into your business culture. A top-down commitment from leadership ensures alignment with investor expectations and stakeholder trust.

Sustainable principles should be adopted from the top down, so they can truly resonate with ESG-minded investors.

Audit current policies and ESG positioning

Take stock of where your organisation stands today. Review your existing investment policies, reporting frameworks, and governance structures.

Identify what’s working, what’s missing, and where ESG principles can be better integrated.

Get support from external resources and partnerships

Don’t go it alone. Today, there’s no lack of resources for companies wishing to embark on a sustainability journey.

Institutions like the OECD and initiatives like the Sustainable Europe Investment Plan offer guidance, grants, and funding opportunities tailored to green transition goals. Tap into public and private networks to support your journey.

Build internal knowledge and capabilities

Sustainable finance evolves rapidly, and so should your team.

Invest in continuous learning through workshops, certifications, and seminars that equip your staff with tools to manage ESG metrics, align with new regulations, and adapt to emerging standards.

Engage with your ecosystem, from employees to partners and communities

Strategies and policies are only as good as the actions you take toward them, and it can’t be a top-down mandate alone. It’s the people on the ground who make it real. Engaging employees through awareness training and incentivising sustainable practices is essential and, without their genuine buy-in, ESG initiatives risk becoming just another box to tick.

At Rydoo, several of our team members have volunteered to join our ESG task force because they believe in the project and want to help shape our journey. When employees feel involved and heard, sustainability becomes part of the everyday, fuelling their commitment.

But these efforts go beyond office doors. Suppliers, customers, and local communities all have a role to play, helping to uncover new ideas and build the trust that every sustainable business needs. Real change happens when everyone owns sustainability.

Beyond regulation, ESG also plays a key role in shaping investor behaviour. ESG-aligned companies are often seen as lower-risk investments. By actively managing environmental and social impact, they’re more likely to avoid the financial and reputational fallout that can follow poor ESG performance.

Environmental awareness, in particular, can lead to smarter decision-making. For instance, businesses that consider carbon impact in their travel or logistics choices are better equipped to avoid future costs tied to emissions offsets or environmental penalties. Proactive action today protects against reactive expenses tomorrow.

A serious commitment to sustainability builds trust, drives long-term growth, and positions your organisation to lead, not follow.

A higher focus on sustainable finance also creates opportunities for new funding streams. We’ve established how more capital is now directed toward ethical and green projects, from institutional investors to public funds and impact-focused platforms. Having a clear ESG strategy not only signals readiness but also earns organisations a seat at the table.

And transparency plays a big role. Companies that embrace ESG often communicate their values with pride. That openness builds investor confidence, giving stakeholders a fuller picture of business operations, culture, and long-term vision.

Sustainable finance is constantly evolving. With regulations like CSRD and the EU Taxonomy raising the bar, and trends like real-time ESG reporting and AI-driven analytics reshaping how companies track impact, staying ahead requires agility and ongoing learning.

At Rydoo, ESG isn’t a side note, but a part of how we operate. In 2024, we reached Gold level in Eurazeo’s annual ESG evaluation, meeting 14 out of 20 key criteria. From carbon tracking to gender pay gap reduction and governance transparency, we’re proving that progress is possible when ESG becomes part of your business KPIs.

It’s not a walk in the park to make this transition, but the benefits are worth it. A serious commitment to sustainability builds trust, drives long-term growth, and positions your organisation to lead, not follow. All it takes is that first step.