Sustainable banking for long-term business and social sustainability

Sustainable banking for long-term business and social sustainability

          Nowadays, when considering investing in industries, investors are more focused on long-term performance than short-term performance, and are more interested in sustainable development and environmental impact. Sustainable banking therefore plays a role in driving business and society towards long-term sustainability.

          Sustainable banking refers to banking that focuses on long-term sustainable growth of business and society through business operations with environmental and social responsibility and under good governance (ESG), as well as creating momentum for all sectors, including households, businesses, and governments, to take actions leading to sustainable development. This will help hedge risks to both the economy and financial institutions.

          Financial institutions such as banks play an important role in ensuring sustainability through the allocation of financial resources from savers to borrowers who need capital. In this role, financial institutions must provide appropriate and transparent services and products and have a good governance structure, without fraud, corruption, or detrimental effects on their reputation. In addition, in providing the credit to businesses, an appropriate consideration process is required, and such businesses must not have impacts on the environment and society. This kind of care should be taken in order to reduce the risks to the environment that may arise from such lending.

          It should also focus on lending to eco-friendly projects without negative effects on the community, such as clean energy loans, which can expand business opportunities to new customers and products.

          In providing financial services, the long-term impact on consumers must be taken into account. For example, it would be helpful if banks offered products based on the customer’s ability to repay in order to reduce insolvency; promoted access to financial services for customers, especially at the grassroots level for the people in remote areas; provided financial knowledge to promote good financial discipline; and provided customers with appropriate information for decision-making on financial products that met the needs and ability to repay of customers.

          The operations under good governance must be promoted both within the financial institutions and in conducting transparent business with third parties, without fraud or corruption. Such operations can significantly reduce compliance risks and impacts on the financial institution's reputation and the banking sector as a whole.