Sustainability and purpose in banking

April 2020

“This is too important. Banks need to act now and get smarter on this topic. We need to start asking smarter questions, even if we don’t have the answers yet.” – Executive

Before the COVID-19 pandemic swept the world, environmental, social, and governance (ESG) issues were being pushed to the forefront for bank leaders by mounting pressure from investors, employees, and regulators to focus more on a broad range of social and economic issues and the impact on all stakeholders. Climate change in particular poses significant risks for banks and the financial system broadly and banks can play a unique role in influencing clients and financing the transition to a green economy. A regulator stated, “[Climate change] is a classic systemic risk. It is far-reaching in breadth and scope; it will reach across all sectors and across all geographies. The impacts are likely to be interconnected across the system. It is nonlinear.”  Banks are still developing their approaches to manage the risks and explore opportunities. An executive noted, “The risk side is what climate change is going to do to your institution and the financial system, the opportunity side is what you can do to drive the economy in the right direction.” 

On February 26 in London and March 4 in New York, Bank Governance Leadership Network (BGLN) participants met to discuss sustainability and purpose in banking, including the nature of the risk, the challenges of response, and the opportunities that banks are identifying along the way. This ViewPoints synthesizes key themes which emerged from the discussions in these meetings, and from conversations with network participants beforehand and immediately afterwards. The ViewPoints is organized around four key areas:

  • Responding to evolving climate risks

  • Grappling with challenges to response

  • Exploring opportunities in green finance 

  • Articulating and operationalizing sustainability approaches