Author(s): Sumit Kumar
Recent heightened concerns on climate change have been reflected in the financial markets. In addition to the 2021 United Nations Climate Change Conference (COP26) being hosted in Glasgow later this month, there have been other instances of extreme weather. According to the projections of several industry experts, the market for sustainable finance expanded by almost 30 percent in 2020. Environmental, social, and governance ("ESG")-related derivatives have been available for a few years, but this hitherto niche market is booming. This increase lends credence to the notion that derivatives play a crucial role in the promotion of ESG objectives on financial markets and the transition to a global green economy. This essay examines the fundamental applicability of Derivatives to ESG Implementations. It has been examined how Hedging and Risk Management can be applied to Corporate Governance, Climate Risk Management, Environmental Stability, and Promoting Social Justice. ESG Derivatives play a significant part in ESG promotion as a whole and can act as a mission-critical tool for reaching the UNSDG 2030 targets. The ethical aspect of ESG Derivatives is a major topic that should be studied in future research.