Lenders must pull their weight in driving sustainability

KCB CEO Paul Russo.

For a long time, the financial system has been accused of being driven by short-term profit maximisation, ignoring concerns about people and the planet.

That’s far from it. It would be important to look at the overall role of the financial system in supporting the needs of the real economy.

That said, the narrative that the banking sector has been slow to respond to environmental sustainability challenges needs to be interrogated further to entrench environmental and social responsibilities across the sector’s stakeholder base.

I would say the banking sector has a big task in shaping a fair and sustainable future—a deliberate commitment to reducing our environmental impact, protecting stakeholders, and promoting responsible practice throughout the value chains.

This includes transitioning clients to finance green projects in renewable energy, energy efficiency, sustainable transport, infrastructure, and agriculture initiatives.

New and emerging economic and financial models now require the respect and support of an ecosystem that includes care for the planet.

The process of rebuilding trust in the banking industry has given birth to the meteoric rise of a new form of banking known as “values-based banking.”

These are financial institutions focused on human needs in the real economy, which include investing in green and socially innovative sectors that are at the heart of a sustainable financial system, with a focus on helping individuals fulfil their potential and building stronger communities.

Values-based banking is purposively oriented toward the development of a sustainable economy. It is a diverse movement drawing in financial players to invest more in long-term customer relationships and not become dependent on the whole idea of making profits, as was the case with traditional banks.

It also demonstrates a different way of operating, which prioritises customers in its governance and operating system as a crucial lever around which new socio-economic and institutional arrangements can be built.

As a powerful channel for citizens’ voices in finance, values-based banking enables people to make more active and informed decisions about their financial needs and the choices of their financial services providers. This is because banks collect large amounts of data from customers, such as transaction data, consumer behaviour, consumption patterns, and preferences, information that banks can use to inform their sustainability journey.

Banking for future generations is basically what everyone should be doing, it is not an option. The industry should not exist outside of or above other parts of the society where it operates.

There is an opportunity to not only increase our value but also to increase the value of the communities we serve. This can be achieved through supporting the long-term financial health of clients, investing capital that will contribute to the local economy, and prioritising the social and environmental needs of the greater community. 

Committing to an enduring purpose-driven approach will require bold leadership and, at least in the short term, economic trade-offs. It also means navigating the local and regional political interests and balancing the expectations of customers and shareholders.

While this can be viewed as a challenge given where we have come from, we consider this a unique opportunity to change how our customers think about their money and how it is used to foster long-term positive progress.

At the end of the day, everything that the private sector and other stakeholders do should go beyond profits, to also safeguard the planet and the people.