Sustainable Finance as a Catalyst for SDGs: Enabling the Transition to a Low-Carbon Economy and Navigating Challenges and Prospective Directions

As the world approaches achieving the Sustainable Development Goals (SDGs) and moving towards a low-carbon economy, sustainable finance is acknowledged as a key ingredient. With a focus on how sustainable finance may be used to redirect capital flows towards environmental, social, and governance (ESG) goals, this study examines the theoretical foundations of sustainable finance. The primary challenge with using sustainable finance to achieve SDGs is overcoming barriers like inadequate regulations, inconsistent ESG indicators, and poor data transparency. These issues hampers effective capital allocation to low-carbon initiatives, obstructing progress toward a low-carbon economy and sustainability goals. This paper examines how sustainable finance contributes to carbon emission reduction and environmental and social sustainability by looking at several strategies, including impact investment, ESG integration, and green bonds. Data transparency, regulatory inconsistency, and metric standardization are some of the difficulties in integrating sustainability into financial decision-making. It also discusses the theoretical frameworks that explain how these financial practices help to achieve the SDGs.