Ethical Banking & Sustainable Finance : Key Concerns Highlights

Aug 01, 2022 - 11:54 AMAuthor - Emerio Banque


Today, almost 80% of global trade relies on trade financial systems which are sustainable & feasible for environmental changes and ensure social justice. This news puts a highlight on ethical finance/ethical banking including ecologically & socially-conscious practices.

As we arrive at the finish of July’s emphasis on ethical banking and sustainable finance, it appears to be simply fitting to figure out the industry’s essential concerns for the area pushing ahead.

Although banks are going to be highly benefited commercially by the concept of ethical banking, it presents us with a few roadblocks that the finance industry as a whole requires to overcome for ethical banking to be effective.

Education And Transparency 

Anna Krotova, who drives the execution of Mambu’s sustainability and ESG strategy, states, “While green banking products and ethical banking ethos generally enjoy a higher demand on an international level, it is still a complex task for the consumers to understand all the things that green banking includes. Therefore, if banks are willing to facilitate the transition to ethical banking and accelerate the profits they generally deliver, they first are required to invest in educating the consumers first.”

She further added, “Furthermore, greenwashing stays a vital matter of concern, with increased levels of doubts among customers. Banks and financial institutions are required to reconsider their ways of communication for sustainability practices with their clients, and guarantee that they are being clear & honest about their procedures.”

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“The EU Sustainable Finance Disclosure and the EU Taxonomy are important areas of regulations that, on a basic level, ought to guarantee that the consumers and other stakeholders have better straightforwardness of a bank's ethical practices. We now are required to keenly observe and consider the financial industry responsible for any discrepancies and adapt to rigid legislative initiatives, if required.”

Better Data

Bertrand Gacon, the CEO and co-founder of Impaakt, a fintech company that leverages a cooperative approach to deal with the measures that are affecting businesses globally, makes it simple.

He provides three important concerns:

1. Absence of standardized, and authentic impact data
2. The connection between financial performance and impact performance isn’t yet settled. 
3. The administration is moving fast but not always in favorable directions

Administrative Mindfulness And Culture Change

There are many challenges that banks are required to overcome to adapt to this latest industry shift, states Jay Nair, SVP, industry head, financial services and public sector at Infosys.

“Firstly, many new guidelines are consistently arising, affecting both traditional & ethical banks. Here, keeping in coordination with these regulators is surely a big challenge for the bank operating in this niche. Data will surely play a vital role in helping banks stay resilient, but many firms face obstacles with data.”

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“For example, new data types will be required to be defined, held, processed, and revealed against. In addition, banks should also invest in educating, training, and brushing up the skills of their staff. There is a need to create some distance from viewing ethical banking as a box ticked and ensure their staff is trained and can show this responsibility through their regular performance.”

“This increases the demand for a huge spotlight on culture transformation. To this end, greenwashing has emerged as another vital challenge for banks and their customers to overcome, which often emerges from firms willing to avail the opportunistic benefit of ethical thinking as a trend.”

“Finally, banks are also required to resolve the obstacles of getting industry cooperation. Several issues are spreading in the entire supply chain and cutting across the banking ecosystem such as rating agencies, investment funds, and many more. Developing normal guidelines, operating models and shared infrastructure is important.”
Reporting Standards 

Apart from the increased demand for ethical banking and sustainable products, a variety of challenges are being faced by the industry, such as reporting disparity. Says Krzysztof Grzeszczuk, senior innovation consultant at Netguru.

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“Leaving aside the expanses of transformation, presently, there aren’t any common standards for ESG reporting, which often makes it complex to approve the effect of a company that it has on its stakeholders,” he says.
“This should, however, not be a reason for the companies to not focus on their agenda and sustainability. In the end, investors, banks, and customers will divert their money to those who know how to operate their business responsibly.”

Responsible Lending

Finally, the business should go with mindful decisions when it comes to lending. 

“Ensuring that the clients should know about their level of affordability which is more vital during this present cost-of-living emergency,” advises James Wilkinson, co-founder of car financing marketplace Zuto.

“The industry also requires us to go beyond finance and resolve the impact we leave on people and the world.”


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