Ethical finance
Like many other business sectors, the financial sector has increasingly committed itself to sustainable development over the past decade. What has led to this shift, what substantial changes have been implemented so far, and what concerns remain? This key issue page provides some background information to these issues, and suggests a number of useful further reading resources.
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A report on global finance and corporate responsibility
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- C. Stowers / Panos Pictures
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This report offers insight into how major institutions are responding to the sustainable development agenda, and also examines increased expectations on business transparency and the role of regulators. In more than 15 articles and interviews the report looks at a number of key issues, including the evolution and development of CSR in the financial sector, motivation and drivers of CSR in the financial sector, or the Equator Principles.
Sustainable development and the financial sector
The driving force behind sustainability in the financial sector has been increased NGO pressure and the resulting public interest in the financial sector’s impacts, as well as the facilitating role of internal advocates within many financial institutions. The two major global frameworks which have been developed to bring more sustainability to the financial sector are the Equator Principles, which cover the financing of large projetcs, and the Principles for Responsible Investment (PRI) by UNEP and the Global Compact. These frameworks aim at helping to bring environmental, social and governance issues into mainstream investment decision-making.
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Project financing
Large-scale projects, for example the building of pipelines or dams, can have negative social and environmental impacts. Efforts to make such projects more sustainable often focus on the companies and firms that implement such projects. But what about the banks which co-finance these projects? Sustainability and responsibility in project finance has become an increasingly important topic. In 2003 a group of major banks signed the Equator Principles, which aim at bringing environmental and social standards to the banking sector. While the Principles have brought about some positive results, weaknesses remain.
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Responsible investment
Next to project financing, the impact of investment funds is another big topic in debates around ethical finance. While traditional socially responsible investment has been practiced for years as a niche market, mainstream investor are becoming increasingly aware of the need to integrate environmental, social and governance concerns into their investment decisions. Ethical concerns have played a role in this shift of thinking among the investment community, however there is also a strong business case for doing so.
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More on ethical finance: the complete listings from Eldis
