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Many financial institutions have realized the importance of sustainable development. Several banks are currently involved in approaches, which help other business firms understand the importance of sustainable business practices. Banking institutions need to review their lending policies to ensure borrowers use credit obtained in a sustainable manner.
Financial regulators need to establish strong codes of conduct to ensure banks comply with social and environmental regulations. Banks need to assess if their borrowers have complied with crucial environmental requirements before offering them credit (Stephens and Skinner 175).
This will make them transact with customers who are willing to fulfill their social and environmental responsibilities. Some investments which banks finance impact greatly on climate change. They have been criticized for giving less attention to environmental and social issues.
The banking sector needs to reclaim public trust and confidence to clean up its reputation. Many banks were heavily involved in the recent global financial crisis, whose effects continue to be felt in many economies. Many financial sectors are not well regulated, which makes it possible for some banks to engage in unethical practices.
Banks need to include environmental and social compliance in the loan application criteria, before giving out credit to business owners. This will make them vet corporate loan applicants to determine their level of compliance to social and environmental goals. Banks award their top executives a lot of incentives and this contributes to income inequalities in many societies.
These incentives encourage banks to pursue profitability more aggressively, at the expense of environmental and social issues (Stephens and Skinner 176). Many banks are only interested in good financial results, which do not have a positive impact on the society.
SWIFT, an association of more than 10,000 banks operating in over 200 countries, has proposed radical measures to enable banks contribute positively to sustainable development.
This association has introduced various proposals which advise banks to make a positive impact on social and environmental issues The initiative aims to encourage banks to develop products, which support socially sustainable businesses because they make a bigger impact on the lives of poor people.
Small and medium enterprises, whose operations conform to social and environmental goals, need financial support to make a bigger impact in their industries. It is necessary for banks to provide them with adequate financing to make their operations more innovative.
Banks need to implement effective processes, which enable them achieve sustainable development goals. They need to change their practices to make more people aware of the importance of sustainable development (Stephens and Skinner 178).
Financial institutions need to change their attitudes towards social and environmental issues. They need to create effective systems to monitor if their borrowers are complying with crucial social and environmental standards.
This will make it possible for them to assess if borrowers use loans for sustainable development. Banks need to provide low interest credit to lower income segments of the market, to enable them sustain positive relationships with their customers. Several European banks have been subjected to a lot of pressure by NGO’s and other watchdog bodies, to stop financing companies, which produce and sell arms (Struyk 330).
Weapon manufacturers have been accused of fueling conflicts in war torn countries, which cause death, suffering and destruction. Therefore, financial institutions need to be vigilant on business ethics to ensure they finance ventures which give people hope for the future.
Works Cited
Stephens, Carolyn, and Chris Skinner. “Banks for a Better Planet? The Challenge of Sustainable Social and Environmental Development and The Emerging Response of The Banking Sector.” Environmental Development 5 (2013): 175-179. Print.
Struyk, Zach. “Book Reviews.” Resources Conservation and Recycling 37 (2003): 329-333. Print.
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