The Experience of Governance Innovations in South Africa

Policy Lever: Transforming Culture

Financial culture is the body of shared values, norms and biases that guide behaviour and decision-making at individual and organisational levels in financial institutions. Failures of this culture – in terms inappropriate risk-taking, ethical failures, and disregard for client obligations – were central to the global financial crisis. Encouraging a financial culture that supports sustainability is an essential complement to more specific policy, regulatory and fiscal measures.  In the wake of the financial crisis significant changes were made to market, sector,and firm-level systems and controls on behaviour, stemming from macro-level reform packages, actions on markets infrastructure, regulation and supervisory guidance. In general however sustainability has not been a core focus.

Examples

Key steps that could be taken to integrate sustainability into the culture of the financial sector include:
  • Consumer education: Extending financial literacy programmes to include sustainability.
  • Professional education: Building the skills and capabilities to assess sustainability risks and issues among financial professionals.
  • Regulator capacity building: Improving the sustainability capabilities of financial regulators and policymakers.
  • Remuneration regulation: Including sustainability in remuneration regulations – so that individual compensation relates to performance in terms of long-term sustainability.
  • Codes of conduct: Incorporating environmental and sustainability in policies to promote integrity in financial markets and the upholding of core values.
  • Non-financial guidance: Encouraging financial institutions to respect global standards of responsible conduct (such as Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises
  • Value-based financial institutions: Ensuring a level-playing field for values-based financial institutions (including cooperatives, impact investment etc.)
  • Market diversity: Promoting diversity of financial institutions in terms of size, geographical focus, ownership and business model.
  • Right sizing financial institutions: Taking action to “right size” financial institutions to deliver sustainability outcomes (e.g. consolidation and unbundling).

Impacts

To date most reforms focused on the culture of the financial sector have not explicitly focused on sustainability, but there is potential for wide application. A robust financial culture focused on the needs of the real economy is a criticalprecondition for other efforts to align the financial system with sustainable development.  

Inquiry Publications

  • The Experience of Governance Innovations in South Africa

    Date: 17-Jun-2016

    This paper explores whether the extent to which Regulation 28, CRISA and JSE Integrated Reporting Standards (referred to as governance policy innovations) have influenced the level of investment that integrates Environmental, Social and Governance (ESG) in its decision making process. It finds that while governance innovations have increased actors’ awareness about interrelationship between ESG factors and financial performance it

  • Values Based Banking

    Date: 21-Aug-2015

    Values based banking is a diverse movement drawing in community banks, ethical, green and socially oriented banks and including cooperatives, credit unions, privately owned banks, B Corporations and public companies that is purposively oriented towards the development of a sustainable economy. The paper identifies four values that need to be at the heart of a

  • 4th Update Report: The Coming Financial Climate

    Date: 07-May-2015

    This is the 4th Update Report of the UNEP Inquiry, it is focused on the challenge of financing the low-carbon transition. Many approaches and instruments will be needed to deliver the financing needed. Public finance, funded by tax revenues and international transfers, will provide part of the solution.  However such finance will be inadequate. Private

  • The Financial System We Need: Aligning the Financial System with Sustainable Development

    Date: 08-Oct-2015

      Download the full report: [AR] [CH] [EN] [ES] [FR] [PT] [RU] Download the policy summary: [AR] [CH] [EN] [ES] [FR] [PT] [RU] This first edition of “The Financial System We Need” argues that there is now a historic opportunity to shape a financial system that can more effectively finance the development of an inclusive, green economy. This opportunity is based on a growing trend

  • A Review of International Financial Standards as They Relate to Sustainable Development

    Date: 22-Feb-2017

    The report, a companion to the second edition of “The Financial System We Need”, examines how the international financial standards currently relate to the goals of sustainable development and explores opportunities for better alignment as a way to promote greater stability, resilience and fairness to the financial system. The key messages are: Financial standards have

  • China Green Finance Task Force Report: International Experience

    Date: 02-Apr-2015

    The Green Finance Taskforce was convened in 2014 by the People’s Bank of China and the UNEP Inquiry. The Taskforce brought together leading Chinese experts on financial markets, policy and regulation from government, academia and from the private sector together with international experts and practitioners. One of the inputs to the deliberations of the Taskforce

  • Financing the Future

    Date: 06-Feb-2017

    Italy’s Ministry of Environment, Land and Sea, in partnership with UN Environment, launched the National Dialogue on Sustainable Finance in February 2016 to identify practical market and policy options to mobilize Italy’s financial system for sustainable development and climate action. The conclusions of the paper are: Italy faces a strategic opportunity to harness its financial

  • Fintech and Sustainable Development – Assessing the Implications

    Date: 14-Dec-2016

    The report, a companion to the second edition of “The Financial System We Need”, assesses how the financial system’s core functions are likely to be disrupted by financial technology (“fintech”) innovations and how they could help – or hinder – efforts to align financing with sustainable development. It considers ways to: Unlock greater financial inclusion by

  • Input from the Netherlands to the UNEP Inquiry

    Date: 20-Oct-2015

    This note summarizes the input provided to the Inquiry at a meeting with representatives from the Dutch financial sector ranging from public policymakers and regulators to the largest banks, asset managers, insurance companies and sustainable frontrunners. The policy recommendations include best practices, financial market policy and regulatory innovations to help bring about the green economy

  • Lessons from Inclusive Banking Experiments in South Africa and Kenya

    Date: 23-Aug-2015

    This paper examines the experience of inclusive banking experiments in South Africa and Kenya. The Kenyan example revolves around the development of mobile money through market led innovation alongside evolutions in the legislative and regulatory process. In South Africa a different approach was taken, with the development of the multi-sector Financial Sector Charter and a National Bank Account (‘Mzansi’) Hawkins

Copyright © United Nations Environment Programme. All Rights Reserved.