Many financial institutions are considering adhering to sustainable banking principles because more people want to work with an ethical bank that represents and acts on the values that mean the most to them. In terms of financial services, sustainable banking factors in environment, social, and governance (ESG) considerations to measure the sustainability and social impact of investment and lending decisions in a business. It is essentially a ‘socially responsible‘ way of identifying material risks and growth opportunities in the financial services sector.
What Are Sustainable Banking Principles?
Sustainable banking principles are guidelines for managing environmental and social risk, footprint, and governance, as well as improving human rights, women’s economic empowerment, financial inclusion, capacity building, collaborative partnerships, and reporting in the financial services sector.
They were adopted by banks, discount houses, and development finance institutions in 2012, with the Nigerian Bankers’ Committee’s approval to further positive social impacts and protect the surrounding community and environment.
When Sustainable Banking Principles Are Used
Sustainable banking principles are used in response to climate changes and financial crises to manage their social and economic impact. It is the way of the future and will continuously become more vital in gaining a competitive advantage over the coming years.
Just considering 2020 as an example, there have been climate change issues starting with Arctic temps and wildfires in Australia, hunger and food insecurities, and the financial and economic impact of COVID-19.
If there were a time that called for more environmental, social, and governance considerations in business practices, it might be the years coming after 2020.
9 Sustainable Banking Principles
These principles can be the base to get started with a sustainable strategy in the banking industry.
We will integrate environmental and social considerations into decision-making processes relating to our Business Activities to avoid, minimize, or offset negative impacts.
This principle enforces a restriction on providing for or funding businesses that pose a threat to the environment or community in which it resides. FIRST For sustainability defines social and environmental risks as environmental pollution, hazards to human health, safety and security, impacts on communities, and threats to a region’s biodiversity and cultural heritage.
We will avoid, minimize, or offset the negative impacts of our Business Operations on the environment and local communities in which we operate and, where possible, promote impacts.
While the first principle focuses on not working with businesses with negative impacts, principle 2 is the commitment a business makes for itself to not negatively impact the environment or community in which it resides.
We will respect human rights in our Business Operations and Business Activities.
It is the business’s responsibility to ensure that human rights are respected in all aspects of their business. To do so, they need to exercise human rights due diligence, which OHCHR identifies the four components to be:
- Identifying and assessing actual or potential adverse human rights impacts that the enterprise may cause or contribute to through its activities may be directly linked to its operations, products, or services by its business relationships.
- Integrating findings from impact assessments across relevant company processes and taking appropriate action according to its involvement in the impact.
- Tracking the effectiveness of measures and processes to address adverse human rights impacts to know if they are working.
- Communicating on how impacts are being addressed and showing stakeholders – in particular affected stakeholders – that there are adequate policies and processes in place.”
We will promote women’s economic empowerment through a positive workplace culture in our Business Operations and seek to provide products and services designed specifically for women through our Business Activities.
This principle is essential for women because it promotes women’s ability to participate equally, contribute, and benefit from your business without gender prejudice. UN Women defines women’s economic empowerment as “access to and control over productive resources, access to decent work, control over their own time, lives and bodies; and increased voice, agency and meaningful participation in economic decision-making at all levels from the household to international institutions.”
We will promote financial inclusion, seeking to provide financial services to individuals and communities that traditionally have had limited or no access to the formal financial sector.
Principle 5 is fundamental because it seeks to provide affordable products/services to disadvantaged and low-income society segments. By doing so, businesses make a positive impact on the economy and community in their area. In fact, UNSGSA says, “Financial inclusion is an enabler and accelerator of economic growth, job creation, and development.”
We will implement robust and transparent E&S governance practices in our respective institutions and assess the E&S governance practices of our clients.
According to principle 6, the business is expected to implement E&S governance practices that are available to the public and are required to assess and ensure that clients are doing the same regularly. ThistlePractice says they “should be able to provide a clearly-defined E&S governance and accountability structure.”
We will develop individual institutional and sector capacity necessary to identify, assess, and manage the environmental and social risks and opportunities associated with our Business Operations.
This principle ensures that the company can set and achieve social and economic goals and give staff access to the necessary skills and resources fitting their position in this ever-changing world.
We will collaborate across the sector and leverage international partnerships to accelerate our collective progress and move the sector as one, ensuring our approach is consistent with international standards and Nigerian development needs.
The wonderful part about this principle is that it encourages collaboration between financial institutions rather than independent (and sometimes) selfish competition. This is geared towards a successful implementation of sustainable banking in the country for society’s wellness as a whole.
We will regularly review and report on our progress in meeting these principles at the individual and sector levels.
In this principle, the business fully commits to reviewing and reporting their sustainability progress to ensure they’re reaching principle goals at individual and sector levels. ThistlePraxis addresses additional expectations like they “also required to produce external performance/progress reports at least annually to initiate a nation-wide review of the performance of the principles towards ensuring the sustainability of the sector.”
Aspiration: Sustainable Cash Management Services
The world is changing, and Aspiration ‘aspires’ to change with it. You can rely on them for sustainable cash management services because they’re fully committed to contributing to your well-being as well as the environment, society, and governance. They believe in the importance of being ethical and socially conscious. So, don’t settle with a financial service that doesn’t represent the same values as you. Instead, work with one that is committed to the positive impact of change and adaptation.
Aspiration knows actions speak louder than words, so they are working hard to contribute by :
- Committing to donating ten cents of every dollar of its earnings to charitable activities expanding economic opportunity.
- Making it easy to make donations to charitable causes that you choose. If you want to give or not (or how much), it is entirely up to you.
Get started with sustainable banking by opening an Aspiration Spend & Save account.