WILL SUSTAINABLE FINANCE REVOLUTIONISE PROGRESS TOWARDS A SUSTAINABLE FUTURE?

Lizzie Caird (OHS)

Sustainable finance “refers to the process of taking environmental, social and governance considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects.”[1] In the UK, key sustainable banks include Charity Bank, “a bank for good”[2], Ecology Building Society, who have lent money to 3,500 projects since 1981, and Triodos Bank, who have 728,000 customers. Whilst the statistics may seem insignificant, there is huge potential for sustainable finance, and it may revolutionise future environmental consciousness and subsequent sustainable action.

The Three Spheres of Sustainability demonstrate how society can meet the needs of the current population without compromising the needs of future generations and focus on the key aspects of social, economic and environmental factors. Naturally, well-managed banking slots into the ‘economic’ sphere, due to sustained economic growth. However, sustainable finance is a feature intertwined with all three aspects. For example, Triodos Bank refers to “banking as a force for good”[3] and aims to make positive investments which encourage businesses to focus on people, the environment and culture, whilst ensuring that the finance is viable through careful lending criteria and limits. Therefore, sustainable finance sits in the centre of all Three Spheres of Sustainability, as it aims to make positive environmental and social change, whilst sustaining the economy. As this is the case, sustainable banking will become a truly progressive method for achieving sustainability and, thus, revolutionise the way in which society regards the environment in day-to-day life.

Projects conducted by sustainable banks already exemplify the impact that this form of finance can have, and will continue to have on a much larger scale in the future. Triodos Bank, for example, financially supported the launch of Ember, the UK’s first all-electric intercity bus service, which currently runs between Edinburgh and Dundee, completing the 125 mile round trip in a single charge. Despite some drawbacks of electric vehicles, this project improves transport infrastructure, thus encouraging access within society and reducing emissions. With further innovation of ‘green’ technologies and awareness about environmental projects, the impact that sustainable finance has could transform the way in which sustainability is approached and allow us to progress much further with A key debate to consider when assessing sustainability is the effectiveness of government bodies versus the impact that individuals can have. Striking a balance is vital to achieve the most progress possible, but individuals can feel that their actions are insignificant. The way in which sustainable banking relies on the individual, as well as the trust between bank and customer, raises environmental consciousness in other aspects of society; most people are struck by the importance of directly protecting the natural world, but are unaware of the negative impacts some banks can have by investing in corporations with huge carbon footprints, or fossil fuel companies. The independence of banking from governments and intergovernmental organisations could allow greater progress regarding sustainability. Whilst the 2016 Paris Climate Agreement was a landmark for climate change mitigation, involving 195 signatories, it is difficult to see worldwide impact, due to interruptions such as the withdrawal of the USA in 2019. Sustainable banks are met with fewer obstacles so can progress independently. Whilst people may be sceptical about the impact of individual banks, the work of larger, international organisations, such as the Global Alliance for Banking on Values (GABV), demonstrates how widespread sustainable finance is, therefore revolutionising environmental action. The GABV is an “independent network of banks using finance to deliver sustainable, economic, social and environmental development”[4], demonstrating the prime positioning of sustainable finance in regard to the Three Spheres of Sustainability. With 65 financial institutions, 70 million customers and assets of $210 billion, it is evident that current actions will have a global impact, something which many government policies do not. Another organisation which will revolutionise both the financial sector and society’s progress towards a sustainable future, is the United Nations Environment Programme Finance Initiative’s Principles for Responsible Banking. This focuses on “the vision society has set out for its future in the Sustainable Development Goals and the Paris Agreement”[5], once again linking directly to the revolutionary environmental landmarks of the twentyfirst century.

For sustainable finance to fulfil revolutionary potential, individuals will need to change their mindsets, both in terms of the effectiveness of sustainable banking and the negative stereotypes associated with banks. However, with growing environmental consciousness due to pressing climate issues, more individuals are turning to positive environmental solutions that they can partake in. The situation is hopeful: as Rutger Bregman pointed out regarding Covid-19, “it’s almost a cliché amongst historians that crises are opportunities for change”[6]. This concept can be applied to the climate crisis and subsequently suggest that people will be propelled into individual action, due to awareness that our planet is in danger. Bregman also

revealed that “the big secret of crises is that they tend to bring out, not the worst, but the best in people” [7], which supports the idea that people will commit to positive and sustainable choices, including the management of their finances through sustainable banking. Furthermore, as crises are recognised by many historians to be a key factor in revolution, this suggests that these changes made in response to the climate crisis will be revolutionary.

Despite possible drawbacks of financing as a force for positive, sustainable change, such as the idea that consumerism itself is damaging to the environment and concerns that smaller-scale sustainable banks lack long-term viability, it is clear that sustainable finance will revolutionise the future of environmental action, however large the impact. The independence of banking compared to governments and the positioning of sustainable finance at the centre of the Three Spheres of Sustainability are features that will result in huge progress in improving the sustainability of society. With constantly evolving mindsets regarding the climate crisis, as well as environmental consciousness, sustainable finance may be one of the most effective routes that covers all aspects of sustainability to secure the future of our society and planet.

Bibliography

Ecology Building Society [Online] Available from: https://www.ecology.co.uk/about-us/ [Accessed on: 20.04.21]

Triodos Bank [Online] Available from: https://www. triodos.co.uk/ [Accessed on 20.04.21]

Ember [Online] Available from: https://www.ember. to/ [Accessed on 20.04.21]

Global Alliance for Banking on Values [Online] Available from: https://www.gabv.org/ [Accessed on 20.04.21]

[1] European Commission, Overview of sustainable finance [Online] Available from: https://ec.europa.eu/ info/business-economy-euro/banking-and-finance/ sustainable-finance/overview-sustainable-finance_ en#:~:text=Sustainable%20finance%20refers%20 to%20the,sustainable%20economic%20activities%20 and%20projects. Accessed [20.04.21]

[2] Charity Bank [Online] Available from: https:// charitybank.org/ Accessed [20.04.21]

[3] Triodos Bank, ‘Banks can be a force for good’: why I chose to be an ethical investor [Online] Available from: https://www.triodos.co.uk/articles/2020/bankscan-be-a-force-for-good-why-i-chose-to-be-an-ethicalinvestor Accessed [20.04.21]

[4] Global Alliance for Banking on Values [Online] Available from: https://www.gabv.org/ [Accessed: 20.04.21]

[5] UNEP Finance Initiative, Principles for Responsible Banking [Online] Available from: https://www.unepfi. org/banking/bankingprinciples/ [Accessed 20.04.21]

[6] Bregman, R (2020) Why, why, why?: What’s going on? Online] Available from: https://www.bbc.co.uk/ sounds/play/m000qjdm [Accessed 3 January 2021]

[7] Bregman, R (2020) Why, why, why?: What’s going on? Online] Available from: https://www.bbc.co.uk/ sounds/play/m000qjdm [Accessed 3 January 2021]

[1] UNEP Finance Initiative, Principles for Responsible Banking [Online] Available from: https://www.unepfi. org/banking/bankingprinciples/ [Accessed 20.04.21]

[1] Bregman, R (2020) Why, why, why?: What’s going on? Online] Available from: https://www.bbc.co.uk/ sounds/play/m000qjdm [Accessed 3 January 2021]