Market News

 March 29, 2007
Banks benefit from Sustainability, says IFC

 Washington, D.C., USA -- Banks that integrate environmental, social, and governance concerns into their business strategies and seek out opportunities in those fields, add value to their business, says a new report from the International Finance Corporation (IFC).

The private sector arm of the World Bank Group has published "Banking on Sustainability," based on detailed research on the experiences of banks in Africa, Central and Eastern Europe, and Latin America. The publication provides practical examples of 14 financial institutions in 12 countries that have taken concrete steps to integrate sustainability into their policies, practices, products, and services.

The report is designed as a guide for strategic planning for financial institutions that want to improve their competitive advantage by integrating social and environmental sustainability concepts, management systems, products, and services into their businesses. It is particularly targeted to commercial and investment banks, leasing companies, and microfinance institutions that together comprise the banking sector in emerging markets.

The report provides details on evidence of the potential benefits for banks of integrating sustainability into business strategy. According to the IFC, it also reveals a "dramatic shift" in banks' awareness of these benefits.

The research presented by the IFC shows a "very positive" move among banks from trying to avoid risks to proactively looking for ways to tap the business opportunities offered by sustainable development. The resulting benefits for banks range from increased profitability and market value to a stronger reputation and improved image in the community.

According to the IFC, a key finding is that individual banks must devise their own unique business case for sustainable banking, determined by their business goals combined with the sustainability trends and factors in the markets and sectors in which they operate.

The report shows how 14 financial institutions:

  • Implemented social and environmental management systems;

  • Developed innovative financial products to expand their business into areas related to social and environmental sustainability; and
  • Reaped positive business impact by integrating social and environmental considerations into their operations and investment decisions.

Examples include Ceska Sporitelna, a bank in the Czech Republic that is leading the way in commercial financing for SME sustainable energy projects; Afriland First Bank, an African bank that is providing loans for environmental improvements in waste collection and treatment as well as microfinance for rural communities and women; and Nedbank, the first African bank to publish a sustainability report and adopt the Equator Principles.

In a 2005 IFC survey covered in the report, 86 percent of 120 financial institutions interviewed reported positive changes as a result of steps they had taken to integrate social and environmental issues in their business.

The survey also revealed demand from financial institutions for information to raise awareness and to aid in building institutional capacity related to sustainability. Banks are seeking more information on sustainability issues specific to particular regions, guidance on sustainable investment opportunities in specific industries with involvement from local enterprises, and practical examples that demonstrate successful implementation practices.

The full report is available for download from the IFC website.

For More Information: International Finance Corporation (IFC)