Special: Going Green: financial engagement helps, exclusion hurts

by: Sandra Phlippen

This article is an abridged version of a contribution to the economics magazine ESB that was published on 11 October.

 There are more and more reasons for banks to make sustainability a strategic focus. Paradoxically, perhaps, this is not necessarily beneficial for society and the world at large. Because if investors focus on excluding non-sustainable economic activity, heavy polluters will be forced to rely on lenders who have no eye for sustainability. This could actually cause overall emissions to increase.

The debate about the role that banks have to play in society is back with a vengeance. The biggest question now facing banks is how to refocus their strategy in order to remain relevant in the future. Besides being market players, banks clearly also carry a great responsibility to society. Since 2014, the interests of customers and third parties have been legally enshrined in the General Duty of Care for Banks and Insurers Act. But what exactly does this mean in terms of a bank’s sustainability ambitions? How far must the social role of banks go?

 

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