What is sustainable finance?
Sustainable finance means using environmental, social and governance information to decide what to fund, at what price, and under what conditions. It directs capital towards activities that are lower-risk over the long term, and away from those that are not.
Two ideas sit inside it. One is avoiding risk: a lender that ignores flooding, carbon costs or weak governance at a borrower is mispricing the loan.
The other is funding change: money raised specifically for renewable energy, efficiency or social projects. Green finance and climate finance are narrower versions of the same idea, focused on environmental and climate outcomes.
What are the main sustainable finance instruments?
The most common are green bonds, sustainability-linked loans, impact investing and blended finance. They differ in what the money is tied to: a specific project, a company-wide target, or a measurable social or environmental result.
| Instrument | What it is | What the borrower or issuer must show |
|---|---|---|
| Green bond | Debt raised to fund specific environmental projects | Where the money went, and what it achieved |
| Sustainability-linked loan | A loan whose interest rate moves with the borrower's ESG targets | Progress against agreed targets, such as emissions |
| Impact investing | Investment aiming for a measurable social or environmental return alongside a financial one | The impact, measured and reported |
| Blended finance | Public or philanthropic money combined with private capital to lower risk | Results against the development goals that justified the public money |
| Climate finance | Funding for climate mitigation or adaptation, from public or private sources | How the money cuts emissions or builds resilience |
Every one of these depends on reporting. A green bond without a record of where the proceeds went, or a sustainability-linked loan without credible emissions figures, is only a label.
What is ESG investing?
ESG investing means using environmental, social and governance information alongside financial analysis when choosing what to invest in. It ranges from excluding certain sectors to actively favouring companies that manage ESG risks well.
Sometimes called sustainable investing, it matters to companies as much as to investors. For the company being assessed, ESG investing works like a credit check.
Investors look at how a business handles risks such as emissions, labour practices and board oversight, and the answers can affect the cost and availability of capital. Our ESG glossary entry explains the three pillars in Nigerian terms.
What are the Nigerian Sustainable Banking Principles?
They are nine principles for how Nigerian banks manage environmental and social issues, adopted by the Bankers' Committee in July 2012. The Central Bank of Nigeria directed banks, discount houses and development finance institutions to implement them from September 2012, with sector guidelines for agriculture, power, and oil and gas.
The nine principles, as set out in the CBN's principles document:
- 01Environmental and social risk management in business activities
- 02Environmental and social footprint of the bank's own operations
- 03Human rights
- 04Women's economic empowerment
- 05Financial inclusion
- 06Environmental and social governance
- 07Capacity building
- 08Collaborative partnerships
- 09Reporting
The first principle is the one borrowers feel. It commits banks to assess environmental and social risk in their lending decisions, which is why a Nigerian company seeking finance for a large project, particularly in power, agriculture or oil and gas, may be asked about its environmental and social risks before a loan is approved. Sustainable banking in Nigeria, in other words, and ESG in banking more broadly, has been reaching borrowers for over a decade.
Has Nigeria issued green bonds?
Yes. Nigeria issued Africa's first sovereign green bond, raising ₦10.69 billion on 22 December 2017, and a second series of ₦15 billion on 13 June 2019, which was 220% subscribed, according to a Debt Management Office presentation.
The DMO offered a third, ₦50 billion sovereign green bond in June 2025, and reported that the ₦25.69 billion raised by the first two series went into renewables, afforestation, education and micro-utilities. Green bonds in Nigeria have also been issued by companies, such as North South Power's ₦8.5 billion green infrastructure bond, according to the Nigerian Exchange.
Why do lenders now ask companies for ESG and emissions data?
Because their own reporting depends on yours. Banks report under IFRS S1 and S2 too, and a bank's largest emissions are often its financed emissions: the emissions of the companies it lends to.
Nigerian banks are public interest entities, so they report under IFRS S1 and S2 for periods beginning on or after 1 January 2028, under the FRC's amended roadmap. SRG 1 expects banks, insurers and asset managers to disclose financed emissions as part of Scope 3. The method most of them use is PCAF, which the GHG Protocol confirms conforms with its standard for investment emissions.
When a borrower cannot supply figures, the bank has to estimate them. A borrower that can supply its own Scope 1 and Scope 2 figures lets the bank replace an estimate with real data, which is better for the bank's disclosure. And under IFRS S1, sustainability risks that affect a company's access to finance and cost of capital are exactly what investors and lenders are meant to see.
What should a Nigerian company do about sustainable finance?
Measure before you are asked. A company that already has Scope 1 and Scope 2 figures, with evidence, can answer a lender's questionnaire in days rather than weeks, and can approach green or sustainability-linked finance with numbers rather than promises.
Three practical steps:
Know your emissions
Start with the records behind your largest sources: grid electricity, generator fuel and vehicles. Our guide to carbon accounting explains how.
Know your reporting date
If you are a public interest entity, your own disclosure starts in 2028. See reporting deadlines.
Keep the evidence
A lender or bond investor will ask where each figure came from, just as an assurance provider will.
If you are a bank, see how Emvert works for banking and financial services, including the borrower data your financed emissions depend on.
Book a demo: we show you the emissions figures a lender will ask for, built from your own records.
Check this yourself
These are the primary documents this guide is based on.