Finance - 31/October/2019

Putting principles before profit?

Expectations are high that the Principles for Sustainable Banking can push banks to change their balance sheets and businesses in line with climate action and other big societal issues

“A massive boost for climate action and sustainability,” is the UN’s description of the Principles for Responsible Banking (PRB). The UN’s sentiments are echoed by the CEO of Germany’s Commerzbank, Martin Zielke. He says the principles demand: “The transformation of the real economy towards sustainability.” Likewise, boss of Amsterdam-headquartered ING bank Ralph Hammers says they reflect the: “Moral obligation [of banks] as global corporate citizens to finance positive change.”

Environmental activists are more sceptical. “We have seen this before — it is too little, too late,” says Johan Frijns, executive director of NGO Banktrack. “This would have looked very good in 1992, but the principles seem to have been drafted as if we have all the time in the world to deal with sustainability problems.”

Certainly, the PRB have been a long time coming. They are modelled on the Principles for Responsible Investment (PRI), launched in 2006 by the UN and a group of institutional investors. The PRI, which require signatory investors to incorporate environmental, social and governance (ESG) factors into investment decision making, have been hugely successful. They now have more than 2300 signatories who manage almost $90 billion in assets — more than half of professionally managed financial assets globally.

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