If we talk about finance as though it is separate from the world we live in, we create a dangerous illusion. The truth is simple: finance does not exist in a vacuum. It is embedded in the systems that sustain us — our families, communities, natural environment, and ultimately our planet. The decisions made about where capital flows — whether into fossil fuels, renewable energy, housing or healthcare — shape not only balance sheets, but the lived reality of every citizen.
And yet, too often we fall into a false dichotomy: speaking about financial growth on the one hand, and environmental or social wellbeing on the other, as if they are opposing forces. This is not only misleading, it is profoundly unsustainable.
Globally, we are told that “sustainable finance” is growing. Estimates suggest that $1-trillion to $5-trillion in assets are classified under the banner of environmental, social & governance (ESG) or impact finance. But even if we accept the midpoint, that is perhaps 2% of global GDP — hardly transformational and highly concentrated in certain geographies and sectors.
Meanwhile, the challenges escalate. In 2024 alone 27 separate climate events were categorised as “one-in-100-year” disasters, trailing only the 28 of 2023. The trend is clear, it is not our friend, and the urgency is undeniable.
Every financial decision has consequences
The illusion of neutrality in capital allocation is particularly dangerous. Every financial decision has consequences. When investment flows into coal mines or oil refineries it locks in emissions and environmental degradation. When capital supports renewable energy, sustainable agriculture or new housing models that support vulnerable citizens, it generates resilience and long-term prosperity. To pretend otherwise is wilful blindness.
For SA the stakes are even higher. We are a country where inequality is written into the geography of our cities, where the fragile elderly often struggle to make ends meet, and where the poorest communities bear the heaviest costs of climate shocks. Finance in this context cannot be treated as “neutral”. It must, by design, help us adapt, thrive and protect the most vulnerable.
‘Asset rich but cash poor’
Consider the example of home equity release for older South Africans. This is not simply a financial innovation — it is a tool with profound social implications. A generation of pensioners sits on the paradox of being “asset rich but cash poor”. Their homes, often paid off through decades of sacrifice, are valuable in the market, yet they may lack the monthly income to cover healthcare, groceries, or transport.
Properly structured home equity release allows elderly homeowners to unlock part of that value while remaining in their homes, preserving dignity, independence and community ties.
Done well, such products are a model of what sustainable finance should look like: not charity, not a financial burden on the state, but a pragmatic alignment of capital with social good.
Done badly, they could replicate the worst excesses of predatory lending. That is why transparency, community participation and intelligent regulation matter so deeply. They ensure that finance does what it should always do — serve society.
This is not an argument against markets. Adam Smith himself emphasised that prosperity requires fair competition, access to information and recognition of all costs — including those borne by society and the environment. Yet today many of the world’s most profitable industries — oil, meat, tobacco, mining, electronics, even mass tourism — would not post a profit if they had to account honestly for the environmental and social costs they generate.
Intelligent risk management
Calling finance “sustainable” is not about philanthropy or sacrifice. It is about intelligent risk management. A coal plant may deliver quarterly profits but it also locks in liabilities — legal, environmental and intergenerational — that society eventually pays. Conversely, investing in resilient housing, renewable power or dignified solutions for the elderly creates durable value. To ignore this is not “free-market efficiency”; it is myopia.
And yet finance remains dangerously backward-looking. Too often it resembles artificial intelligence trained on old data — trying to navigate the future with a rear-view mirror. The global south cannot afford that luxury. Here, development finance must be more than just roads, schools or housing. It must also guarantee that these investments are resilient to shocks — climate, social and financial. Otherwise, any gains are fleeting.
Sustainability must once again mean what it says: the capacity to endure, to support life, to leave future generations better off.
The deeper issue is that we have lost clarity of language. “Sustainability” itself risks being hollowed out. When every company calls itself “sustainable” — from oil majors to cigarette makers — the word ceases to mean anything. We should resist this dilution. Sustainability must once again mean what it says: the capacity to endure, to support life, to leave future generations better off.
Ultimately, finance is just a tool. Its purpose is to serve society. And yet we have built systems that allow finance to dictate terms, often divorced from social or environmental reality. This inversion is at the heart of our current unsustainability.
The task before us is to be radically honest about the impact of each financial decision, to reconnect finance with the broader world it inhabits, and to realign capital flows with a future in which people and planet can thrive.
Whether it is helping an elderly homeowner unlock equity, ensuring that housing developments withstand climate stress or steering investment away from industries that undermine health and ecosystems, the principle is the same: finance must be reconnected to life itself.
That, and nothing less, is the meaning of sustainable finance. Anything else is simply a dangerous illusion.
• Loker is founder of Water Financial.
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