Countries around the world are working hard to live up to the Sustainable Development Goals laid down by the United Nations by 2030 stated by Bahaa Abdul Hussein. The sustainable world being envisioned by the SDGs is a world with increased climate action, no poverty, affordable clean energy, decent work, economic growth, responsible consumption and production. A key tenet that underlines the SDGs is that of sustainable finance. Read on to know how sustainable banking and finance fit into all of this.
What is sustainable banking?
Over the years, the focus of banking has moved away from increasing profits at any cost to a more eco-friendly approach. Sustainable banking, otherwise known as social, ethical or green banking refers to the banking sector transitioning into a sustainable model. The main goals of it include practicing pro-environment policies, maintaining transparency and boosting local community. On the whole, it aims to achieve smooth flow of operations with a focus on responsible banking and supporting green investment practices.
What are the goals of sustainable banking?
Guided by a social and environmental consciousness, sustainable banking has formulated some fundamental goals.
1) Human life
Banks have a responsibility under sustainable finance to promote those practices that improve the welfare of human life. This means everything from accessible mortgage and healthcare to right to basic education and employment.
2) Green energies
Banks have indeed been slow to switch to clean energies and fuels and put the brakes on operations that still depend on coal and gas. Investment is now being made on alternate energies for a greener world and they are also working on decreasing their carbon footprints.
3) Economic inclusions:
Financial inclusivity is an important part of sustainable finance and banking. This is why ethically supporting the local community and promoting community banks is also essential. Promoting SMEs (small and medium enterprises) also goes a long way in helping domestic agro industries thrive.
4) Regulatory compliance and disclosures:
Banks are now forced to comply with international rules and regulations surrounding the limitation of carbon emissions and adoption of green measures in their functions. This also helps tackle the ethical pressures from customers who value where their money is going.
5) Environment-led action:
Sustainable and value-led banking has created a model of banking that both internally and externally promotes greener modes of operation. They invest in more green finance projects, organize biodiversity preservation drives, incentivize employees and customers to support sustainable banking.
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