GIVEN that two thirds of worldwide finance is conducted by banks, that industry can be instrumental in achieving the vision laid out in the two groundbreaking global agreements — the UN Sustainable Development Goals (SDGs) and the Paris Climate Accord — agreed upon by world leaders in 2015.
It is gratifying and encouraging, therefore, to see banks stepping up to take a leadership role as members of the United Nations Environment Finance Initiative (UNEP FI), which to date involves more than two dozen banks from five continents and 19 countries managing some US$16 trillion (RM66.12 trillion) in assets.
And proudly we noted late last month the latest addition to the club: Malaysia’s CIMB Group Holdings Bhd, the first participating bankers from the Asean region.
On the agenda for the core group is the development of Principles for Responsible Banking, which are being drafted in consultation with other UN bodies, the wider industry, banking regulators, civil society organisations, and others.
The goal is to redefine banks’ purpose and business model to align with the SDGs and Paris Climate Accord, both of which have set ambitious targets.
The global banking principles will:
DIRECT banks’ efforts to align with society’s goals as expressed in the SDGs, the Paris Agreement, as well as national and regional frameworks, and set the global benchmark for sustainable banking;
DRIVE ambition by requiring signatory banks to set goals for and report on their contribution to national and international social, environmental and economic targets;
ENSURE accountability and transparency on banks’ impacts;
and CHALLENGE the banking industry to play a leading role in creating a more sustainable future.
The first in-person meeting of banks participating in the drafting process took place in London in April; the principles will be launched for global consultation at a UNEP FI Global Roundtable on Nov 26 in Paris.
This is the latest work by the UNEP FI, which was created after the 1992 Earth Summit to promote sustainable finance. Today, more than 200 financial institutions, including banks, insurers, and investors are taking part.
The UNEP FI initiative also works to foster country-level dialogues and promotes financial sector involvement in processes such as the global climate negotiations.
In the words of the Executive Director of UN Environment, Erik Solheim: “UN Environment’s Finance Initiative has been working for 25 years to bridge the gap between global finance institutions and the environmental agenda, so that both people and planet can flourish. We’ve worked with leading banks, investors and insurers, forging partnerships and steadily helping to move the markets. We’ve now reached a place where greening finance, and financing a green economy, are no longer seen as optional, but rather as best practice.”
These are indeed positive developments. Progress has been painfully slow. It took us a long time to fully realise and accept that human activities over the last 100 years have been threatening the long-term liveability of our planet.
Take the case of climate change. The first assessment report released by the Intergovernmental Panel on Climate Change warning about global warming was issued in 1990. It took the global community a quarter of a century to come together in the form of the Paris Agreement to strengthen the global response to this existential threat.
In the case of biodiversity — which is the basis of our food, medicines, fuel and livelihoods — we are nowhere near the global targets of conserving and sustainably using it as enshrined in the UN Convention on Biological Diversity. Businesses play a decisive role.
Business operations depend on biodiversity and ecosystem services, and biodiversity loss is therefore likely to have a significant negative impact on business operations.
The case for sustainable development is much more complex.
Living within our environmental limits is one of the central principles of sustainable development.
Two consequences of not doing so are global warming and biodiversity loss.
But the focus of sustainable development is far broader than just the environment. It’s also about ensuring a strong, healthy and just society. This means meeting the diverse needs of all people in existing and future communities, promoting personal wellbeing, social cohesion and inclusion, and creating equal opportunity.
This is why the initiative taken by the CIMB Group is laudable.
We hope more leaders in the corporate world would follow suit.
Zakri Abdul Hamid, a senior fellow of the Academy of Sciences Malaysia, is a member of the Global Leadership Council of the UN Sustainable Development Solutions Network and the Chairman of its Malaysian chapter