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Sustainable Finance?
A Critical Analysis of the Regulation, Policies, Strategies, Implementation and Reporting on Sustainability in International Finance

Working Paper

Authors: Martijn Boersma    Thomas Clarke   

Published By: UNEP Inquiry   

Date: Feb 2016

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Sustainable Finance?

This paper seeks to assess how the international banking community is building sustainability into corporate strategies; how effectively these strategies are being implemented; how sustainability is being embedded into key business processes and decisions; and how sustainability principles are reflected in reporting. It presents an assessment of the sustainability performance of banks using a range of frequently used indicators, while also scrutinizing the indicators by examining the extent to which they effectively measure the performance and commitments of banks. While many banks achieve high scores on these indicators, there is evidence that there are significant flaws which are not adequately addressed.

It is argued that flaws that contributed to the global financial crisis – misaligned incentives, information asymmetry, financial innovation and levels of risk – also pose risks from a broader environmental, social and governance perspective. A schism exists between symbolic and substantive efforts towards sustainability, which is indicative of sustainability not being integrated in overarching business strategies.

The research concludes by arguing in favour of increased convergence of corporate social responsibility and corporate governance, which would embed sustainability into authoritative frameworks, make environmental, social and governance matters more enforceable, and firms increasingly accountable. Yet, these advantages will likely only manifest when self-regulation is reinforced by mandatory regulation in critical areas.

[This paper was presented at the UNEP Inquiry/Centre for International Governance Innovation Academic Symposium on the Design of a Sustainable Financial System, held in Waterloo (Canada) in December 2014]

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