Antoni Ballabriga, Global Head of Responsible Business at BBVA, analyzes the role of financial education as a fundamental driver in overcoming the challenges of integrating sustainability into financial decisions in this article published by the newspaper "La República" in Colombia.
We are all increasingly aware of the consequences that our current economic model can bring to the environment, to society and to the way we live. Several international frameworks - such as the 2030 Agenda of the United Nations or the Paris Agreement - have recognized the need to promote a sustainable economic development model.
The financial sector plays an important role in financing such model, as financial intermediaries have the ability to mobilize capital through sustainable investments and loans, integrate sustainability in their processes and risk management strategies and provide advice to clients and investors in order to promote the change of behaviour required by this deep transformation.
Sustainable finance, or the incorporation of environmental, social and governance factors in financial decisions, is in its early stage. Big corporations, institutional investors and asset managers are starting to embed ESG factors in their investment policies and strategies. Governments and central banks are working fast to promote sustainable finance mobilization, better risk management and improved transparency. But individuals, retail investors and SMEs are still very far from the path we need to follow.
As mentioned by BBVA’s Chairman, Carlos Torres Vila in the opening session of the EduFin Summit “financial education is essential to promote a sustainable and inclusive growth” In fact, financial education can play, in our opinion, an important role to overcome some of the many challenges we have when integrating sustainability into our financial decisions.
The first one is AWARENESS:. An improved knowledge among financial decision makers regarding sustainability is required. This includes, of course, the acknowledgment of the Sustainable Development Goals and the existence of climate change, its effects and the risks associated with it, but it also refers to the impact of human activities on natural capital and biodiversity, the rise of inequality or what inclusive growth means.
The second is UNDERSTANDING. Equally important is to increase the knowledge on sustainable finance. Small and large investors need to understand the diverse investment strategies, the great variety of sustainable finance products and how they work, the need of ESG risk integration, and how relevant is the impact of their financial decisions.
And the third one is ACTION. We need to translate this awareness and understanding into decision-making. Financial education, if contextualized and proportioned in key learning moments, can promote the behavioral change required.
Awareness, understanding and action are three key challenges that allow us to draw attention to the strong link between sustainable finance and financial education.
At BBVA we work to improve society’s financial knowledge and skills, including not only large investors but also small savers, retail customers, entrepreneurs or non-profit organizations. By doing so we believe we can collectively promote sustainable development.