It has been a while since we’ve written on Sustainable Banking, in part because one of the conclusions of the FaithInvest Sustainable Banking Interest Group was shareholder advocacy for business policy and practices change at major banks was seen as far more effective than customer advocacy – the latter being the focus of our erstwhile effort – and good shareholder advocacy work is underway at organizations like ICCR and Shareholders for Change (SFC), and with the formation of major environmental associations like the Net-Zero Banking Alliance (NZBA) in 2021.
But after the NZBA softened its stance on member banks funding fossil fuel projects last November, some banks have quit the alliance.
The motivations of banks from an external organizational perspective are possibly obvious, or at least can be easily theorized, but what’s going on inside these banks, where people, like you and I, are making business decisions that, as examples, soften the NZBA’s environmental requirements or cause you to leave the alliance in protest? How might internal insight to these views influence our advocacy?
Helpfully, organizations like Climate Safe Lending Network (CSLN) can ‘see’ inside banks and report on how their decision-makers feel and operate, at least as it pertains to the bank’s business practices relative to the environment. Last month CSLN released a survey of “bank insiders” working in a variety of functions (risk, regulatory, marketing, etc.), asking questions on sustainable banking relative to the bank’s current practices.
An interesting story emerges from these insiders:
90% said their own institutional was not doing enough, as
60% felt their ‘institution was nervous about being seen to lead…on sustainable practices’, in part because
67% said ‘their institution was nervous about being perceived to be greenwashing’ and risked legal action because of this perception
So banks are lagging on sustainable finance because they don’t want to risk legal action from real actions that might be perceived as greenwashing? Really?
The survey also found that those groups within banks with external facing roles (investor relations, communications) were more likely to support sustainable banking practices, while internal facing roles (operations, finance) were less likely. These insights could provide potential signs to where and how your shareholder advocacy efforts should be focused for more effective outcomes.