Sustainable banking
As mentioned in the previous blog, more and more banks are realising the importance of sustainable finance and joining the sustainable development bandwagon, amidst the global trend towards sustainable finance. They realise that ignoring social and environmental issues can damage their credibility and reputation. Sustainable banking is essentially about contributing to the achievement of sustainability. Specifically, sustainable banking is directed by the ESG framework, incorporating environmental, social and governance (ESG) criteria into traditional banking, where ESG outcomes are a key objective. The UN-organised Net-Zero Banking Alliance brings together global banks representing over 40% of global banking assets, which have committed to integrating their lending and investment portfolios with net-zero emissions by 2050 (The United Nations, 2021). As of 19 January this year the alliance had over 100 members.
Why banking sustainability is important?
The traditional banking industry's goal is simply to make a profit and they lack a far-sighted investment strategy, which often leads to environmental damage and economic collapse in the long run. Banks can implement sustainable business in many aspects of their internal day-to-day operations, in their daily business and so on. For example, using environmentally friendly materials, reducing the carbon footprint of bank products and developing a sustainable development strategy. According to research conducted by the International Finance Corporation (IFC), incorporating sustainability into bank strategies and business processes has various advantages. For example, improved brand reputation, increased investor confidence, reduced operating costs and increased bank competitiveness. On the customer side, more customers expect a bank that operates sustainably to serve them (Deloitte, 2017). A sustainable bank satisfies customers' concern for social responsibility and the transparency of sustainable banking helps customers to achieve their goals of changing the world.
Practices
The services and products offered by banks are a major response to
sustainability. For example, microfinance for farmers reduces poverty and food
production increases, thus reducing hunger. Insurance and savings provided by
banks help families cope with unexpected health crises. Bank support for
education helps the goal of quality education to be achieved. Banks' lending
services to the public sector can address public safety issues and build
sustainable infrastructure (Nwagwu, 2020).
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References
Deloitte (2017). Sustainable Banking as a Driver for
Growth: A Survey of Nigerian Banks.
Nwagwu, D.I. (2020). Driving
sustainable banking in Nigeria through responsible management education: The
case of Lagos Business School. The International Journal of Management
Education, 18(1), p.100332.
The United Nations (2021). Net-Zero Banking Alliance –
United Nations Environment – Finance Initiative. [online] Available
at: https://www.unepfi.org/net-zero-banking/.
