Development of Sustainability in the Finance Sector

In terms of distribution of financial resources, which is a key issue for sustainable development, financial institutions, especially banks have a critical role. From the private sector to public sector, from governments to individuals everyone needs banks, and in this sense, banks have a determinant mission through its services in the issues from the environment to human rights, to social justice.

When looking from the perspective of sustainability applications, for the sustainable development to occur, a significant amount of investment is needed: Sustainability needs environmental technologies, new energy systems, nature conscious substructures, and information technology that supports these issues to be provided. Here, governments and public institutions were seen as main resources. But in time, it was understood that these investments are not enough. And the mission of finance sector, at this point, is to eliminate the barriers in front of financial inclusion and to provide financial operations in the most affordable way.  In this sense, again, finance sector negotiating with the law-makers, making an effort to provide the necessary legal eases, became a necessity. In addition to these, finance sector also had steps to be taken in terms of its activities related to sustainability (power-paper usage, working relationships, facilities provided to the client… etc.) Delphi International Ltd., 1997).

Although the finance sector has had an active role in terms of having an intermediary role to provide the necessary financial sources for sustainability, it has realized the steps that it must take related to its own activities more recently; until the end of the 1990s, finance sector, specifically the banks, thought that they were more environmentally-conscious compared to the other sectors. In this term, researches, which revealed that banks, including their customers, thought that they were not related to the environmental issues, were conducted. But today, this perspective is changing. The finance sector, taking into consideration the importance of its intermediary role in the economic system, has become an important part of sustainability.

There are four stages where the finance sector, in specific, banks, can progress through sustainability: Defensive banking, preventive banking, offensive banking and sustainable banking. In the first stage, banks are not active in terms of sustainability and even they try to delay the possible applications (for example applications related to energy efficiency). In the second phase, banks realize the sustainability applications that are made obligatory for them by the state or civil society. And in the third phase, they produce sustainable products in addition to their internal issues such as environmental investment funds, financing the sustainable energy… etc., but here, they are active only in the cases where there is a double-sided gain. In the fourth stage, sustainability influences all the functions of the bank and while the bank makes a decision, it focuses on whether the results of the decision are sustainable or not.

Figure 1: A typology of banking and sustainable development, Jeucken, 1998

In order to a bank to make a progress through these stages, many financial institutions and organizations are making suggestions for financial institutions and specifically for banks. “Sustainability Guidelines for the Banking Sector” which was prepared by Türkiye Bankalar Birliği (the Banks Association of Turkey), is one of the most comprehensive examples of this situation. In this guide, it is stated that there are seven main principles for the banking sector in terms of sustainability:

Principle 1: Survey and management of environmental and social risks arising from banking activities

Principle 2: Management of the banking industry’s internal effects

Principle 3: Human rights and employee rights

Principle 4: Stakeholder engagement and communication

Principle 5: Corporate governance

Principle 6: Capacity improvement

Principle 7: Monitoring and reporting

In the light of these principles, banks get the opportunity to evaluate themselves and direct their future strategies. This study and other studies like this comprise the outputs of the discussions of sustainable finance and banking, which is becoming widespread nowadays. It is seen that this discussion will even become more widespread and maintain its importance.

References

Delphi International Ltd. (1997). The Role of Financial Institutions in Achieving Sustainable Development, Report to the European Comission.

Jeucken, M. H. A., Bouma J. J. (1999). The Changing Environment of Banks. GMI Theme Issue: Sustainable Banking: The Greening Finance.

Sözleşme

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as

Sözleşme

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as

lorem klsdjlk sajdk ajsdkjskdjıoqw dqwuda sd lsdidss uds mdsudusuadahskasjh dsajdhajskhd kjasdhjkashdjk asjdhaskjkhd as