Characteristics of and reasons for a greater focus on social aspects in sustainable banking
With the release of the European Action Plan on Sustainable Finance of the European Commission in 2018, the sustainable banking and finance topic has shifted from a niche phenomenon to an essential part of the European political agenda. While so-called ethical banks emerged in Europe in the 1970s and the decades that followed, the mainstream players in the financial market have only recently integrated more sustainable investment offers in their portfolios. Despite these encouraging shifts towards more sustainability, these sustainable banking activities often put more emphasis on the ecological than on the social dimension of sustainability (e.g. fossil free investments).
We argue that a stronger focus on social inclusion and social aspects is needed within the banking and finance industry in order to implement the whole spectrum of the UN Sustainable Development Goals. Banks and other financial institutions (should) play a crucial role in enabling and financing – in alliance with the public and the third sector – a social turnaround. Therefore, this paper aims at, first, pointing out the social aspects of sustainable banking and, second, how banks and financial institutions can contribute to solving social issues. After discerning different concepts and providing some underlying definitions, the paper takes an initial look into practice. The methods used were unstructured interviews and document analysis. The results of this project stress that the social dimension of sustainable banking lies in the interaction of various measures in order to reach social and financial inclusion. Finally, the paper suggests further action not only from the practical perspective, but also from a theoretical as well as an empirical research perspective, and at the policy level.