This chapter explores the theoretical foundations and practical applications underpinning sustainable finance. It begins by examining the historical evolution and ongoing debate surrounding corporate purpose, contrasting traditional shareholder primacy with broader stakeholder perspectives and exploring different theoretical arguments. The chapter traces the evolving definition of sustainable finance, mapping its journey from early ethical exclusions (“sin stocks”) to the comprehensive integration of Environmental, Social and Governance (ESG) factors and the targeted approach of impact investing aligned with goals like the Sustainable Development Goals (SDGs). Building on these foundations, the chapter analyzes the mechanisms through which various stakeholders exert influence to drive corporate change toward sustainability. The chapter then explores the impacts of sustainable finance on capital markets, detailing how ESG considerations are reshaping equity valuations, debt instruments (like green and social bonds) as well as the overall cost of capital for companies. Finally, the chapter provides a snapshot of the sustainable finance market, outlining its current size, growth trends, dominant players, evolving fee structures and key asset allocation patterns across equities, fixed income, and alternatives.