Sustainability in the financial sector

© C. Schrijver
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Sustainability in the Financial Sector

EXECUTIVE SUMMARY

The financial sector has been accused of not being in line withthe broad and long term approach
that sustainable development demands. Given the important position banks have in the economy,
they are able to influence the pace and direction of economic growthand as such, have an increased
responsibility in ensuring that sustainability is embedded in the economy. Project finance decisions
which are not based on criteria that go beyond the financial impacton the investor can lead to irresponsible channeling of financial flows that do not ensure environmental and social sustainability. It is therefore essential that financial institutions base theirinvestment decisions on a broader spectrum of issues that also include environmental and social factors. Development Finance Institutions (DFIs) are specialized development banks that aim to bridge thegap between commercial investments and government development aid. Such banks are often involved in large-scale projects where the environmental and social risks can be considerably high. This studytherefore investigates how a development bank can assure that sustainability is included in its core business while overcoming resisting forces.

A preliminary literature review results in an...