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May 14, 2001
Book Review: Sustainable Banking
by Mark Thomsen
Scholarly collection of perspectives and case studies explores the international financial
sector’s role in sustainable development.
SocialFunds.com --
The financial sector’s role as an intermediary in influencing sustainability is not a new
subject. For example, concerned environmental groups and other stakeholders have long held banks
liable for financing mining and oil projects in environmentally sensitive areas. The 1997-98 Asian
financial crisis, however, seems to have been the event that has truly turned the world’s eye
toward the relationship finance and sustainability. Since then, the financial sector has been
slowly responding to increasing shareowner and stakeholder expectations regarding social and
environmental performance.
A new book, “Sustainable Banking – The
Greening of Finance,” looks at perspectives and case studies on how various changes in the
financial sector are moving banks in the direction of sustainability. Published in association
with Deloitte & Touche, the book was edited by Jan Jaap Bouma, Marcel Jeucken and Leon Klinkers.
Bouma is an economist and an assistant professor at Erasmus University in Rotterdam, Netherlands,
Jeucken is a research economist at Rabobank Group, and Klinkers is with the Corporate Real Estate
Management Group of Deloitte & Touche.
The editors choose to define “sustainable
banking” in a broad sense. “The term is dynamic,” the editors write,
“because its definition changes over time; also, it has no clear borders – the
relationships of banks with their stakeholders makes the concept relevant to actors other than just
the banks themselves.” But Bouma, Jeucken and Klinkers do choose five central themes in
which to categorize the topics presented in their book: the policies of banks, transparency and
communication, environmental investment funds, environmental risks and their repercussions for
banks’ products, and the role of governments, NGOs and multilateral banks.
Transparency and communication are relevant to a number of stakeholders, including social
investors. Bjorn Stigson, President of the World Business Council for Sustainable Development
(WBSCD), discusses in his essay the WBSCD’s efforts to establish metrics that would allow
financial markets to quantify eco-efficiency. Says Stigson, “As institutional investors,
banks need to know to what extent the environmental performance of a company impacts on its
shareholder value. A system of metrics and reporting with cross-comparable indicators is precisely
the management tool that will allow banks to measure the link between environmental performance and
shareholder value.”
On the subject of sustainable development funds, Stefan
Schaltegger and Frank Figge of the University of Luneburg, Germany believe that as financial
markets seek to reduce risk by incorporating environmental and social performance into investment
decisions, a danger will arise to passively managed assets. “Risks that have been turned
down by proactive asset managers will end up with those asset managers that do not yet have the
appropriate screening and assessment methods in place,” write Schaltegger and Figge.
Some banks are already incorporating environmental risk assessment into their day-to-day
activities. Andrea B. Coulson of the UK’s University of Strathclyde found through research
on British bank Lloyds TSB that lending officers have become more aware of corporate best and worst
environmental practices. Coulson notes “Officers guard against the risks of lender liability
for the environment while pursuing lending opportunities with companies whose management seeks
financial and environmental benefits through sustainable activities.”
The book also
offers perspectives on the environmental policies of banks and some special cases of the role of
government, NGOs and multilateral banks. While the majority of the book is from a European
viewpoint, there are a few authors from Asian and Eastern European countries. What is noticeably
lacking are writings from a developing country perspective; the book would have been better
balanced if more of such viewpoints were presented.
“Sustainable Banking” may
be too academic for the average armchair intellectual interested in sustainable development. For
professionals in the financial sector, however, the book provides a valuable snapshot of where
sustainable banking is, at least in Europe. And more importantly, it offers insight to where
sustainable banking just might be headed.
"Sustainable Banking - The Greening of
Finance," edited by Jan Jaap Bouma, Marcel Jeucken and Leon Klinkers, Greenleaf Publishing, 2001.
©
SRI World Group, Inc. All Rights Reserved.
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