Sustainable Finance Investment Banking: 5 Concepts You Should Consider

Sustainable Finance Investment Banking

Sustainable finance investment banking focuses its activities on financing the development of corporations and enterprises in an environment-friendly and socially responsible way under the limits of regulatory compliance. Clients can range from financial institutions and institutional investors to small or medium-sized companies that require sophisticated financial products according to the nature and size of their activity.

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Here, we will look at the five fundamental concepts that will clarify the working of investment banks:

  1. Bonds and Shares

Bonds are debt securities issued by companies or public administrators. Financial investors buy these bonds to raise funds for the company to finance its activities. The bond issuers promise to repay the borrowed funds to the bondholders, plus a coupon that means a fixed interest amount. When issuing bonds, companies requiring money resort to investment banking institutions for placement assistance.

Buyers and sellers enter stock markets to trade the stock. Shares are equivalent parts to divide a company’s capital. When a buyer agrees to pay a certain amount for a company’s shares, and a share owner agrees to sell their shares in return for money, a transaction is carried out if the demand and supply match each other.

  1. Corporate Loans

A corporate loan is a financial transaction in which the investment bank lends money to a company in exchange for interest. Banks lend a particular amount to the borrower, and the borrower signs an agreement to return that amount to the lender within a specified period, along with an interest rate. The higher the risk involved, the more expensive the loan cost.

Corporate loans might be syndicated or bilateral, depending on the number of lenders involved in the transaction. These days, most lenders prefer providing capital to ESG-compliant companies that will soon be the future of the business world.

  1. Project Finance

In project finance, the investment bank provides financing to a large energy or infrastructure project involving enormous amounts subject to the payback period. The projects depend on the long-term predictability of a company’s cash flows and consist of fixed contracts between market regulators, suppliers, and customers. Often, the financing activities are closely related to the development of basic infrastructures in a country, contributing to its overall economic growth.

  1. M&As

M&As stand for Mergers & Acquisitions. One company acquires, partners, takes control over or buys stakes in another company to expand its existing business or enter new markets. Sustainable finance investment banking focuses on solving the corporate problems of both parties and provides ideas to generate shareholder value.

  1. Trade Finance

Trade finance refers to financing a portfolio of products a company requires to facilitate foreign trade. It enables banks, exporters, importers, export credit agencies, and insurers to carry out international transactions. The product portfolio includes letters of guarantee, discount invoices, insurance and buyer’s credit. Trade finance enables people and businesses to exchange goods and services from other countries, mitigating the risk of foreign trade and simplifying the settlement process.

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Sustainable Finance investment banking provides complete support to increase a company’s capital and deliver more value for goods and services. It raises money and issues new shares to increase the company’s share value without any extra disbursements. Utilize any of these investment banking concepts to grow business and sustainably expand horizons.

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Scarlett Watson

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