Impact banking: Can this generation of leaders change banking for good?
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Impact banking: Can this generation of leaders change banking for good?

From the United Nations and the European Commission to customers and shareholders, the world’s banks face increasing pressure not only to consider their broader role in society but also to take actions that have a positive impact on it. There is no doubt that most chief executives take this challenge seriously. Whether they take it far enough remains to seen.


It is 10 years since the collapse of Lehman Brothers marked the height of the global financial crisis and the biggest existential threat the global banking industry has ever faced.

That anniversary has sparked plenty of discussion about whether, and how, banking has changed.

In general, banks today are safer, better-run businesses producing decent returns. Banking is doing well again. But a deeper change is taking place. This generation of leaders have been forced to consider banking’s broader role in society.

The motivations are varied: the scars of the financial crisis, the need for reputational rehabilitation, a new generation of staff not driven purely by financial reward and the concerns of clients.

Sometimes the motivation is even closer to home, as BNP Paribas chief executive Jean-Laurent Bonnafé remarked at a recent conference: “My relatives do not care about our financial performance. The only time I got congratulations from my daughter is when we were named the world’s best bank for sustainable finance by Euromoney.”


Euromoney has the privilege of talking regularly to the leaders of the world’s biggest banks. And there is no doubt that, in most cases, they take the role of finance in benefiting societies, economies and the environment very seriously.

In this special report to coincide with annual World Bank/IMF meetings, we look at how banks can make – and in some cases are already making – a positive impact. Initiatives range from sustainable finance to financial inclusion, from urban regeneration to protecting jungle wildlife.

Impetus is coming from organizations such as the United Nations and the European Commission, and also from a group of champions of impact banking.

And most importantly of all it comes from countless bank employees in all corners of the world working with clients and communities, using finance to effect positive change.

Perhaps, a generation from now, this will be seen as the real legacy of the global financial crisis.

It has been 10 years since the financial crisis, and for the most part the global economy is back on track – as are bank earnings. That is good news, because now there is a different focal point for the world, 17 of them in fact – the UN’s Sustainable Development Goals (SDGs).

Can banks be the vehicles that help us reach those goals? 


It certainly seems like they want to be. In a decade, the banking industry has gone from harming society with collateralized debt obligations to saving society with corporate social responsibility. Bank chief executives evangelize about their commitments to conservation, low-income communities, jobs and clean energy. Annual reports liberally reference the SDGs and internal impact targets, while providing case studies of neighbourhood revitalization projects and loans to green entrepreneurs. 

And then there are the enormous numbers to try to comprehend. Morgan Stanley has a $250 billion commitment to low-carbon solutions by 2030; JPMorgan Chase has said $200 billion by 2025; Bank of America has a $125 billion environment goal. There are the philanthropic goals, the inclusive finance goals and other aspirations too numerous to mention.

The wider world is right to be sceptical. Does the move by banks to espouse sustainability have society at its heart or just profit? And, most important of all, is it actually having a positive impact? 

As doing good has become embedded in bank messaging, a bigger question has arisen, one that is likely to guide the next decade of banking evolution and, potentially, bank regulation: what is a bank’s responsibility to society and how does it best achieve that? 


In November, the United Nations Environment Programme’s Financial Initiative (UNEP FI) will put these questions to the public with the release of its first draft of the Principles for Responsible Banking

“It is time for the banking industry to set out its positive role for society and the environment, and make clear why we need a banking system and what it is the banking industry will deliver to society,” says Simone Dettling, who leads the banking team of UNEP FI.

It is both a back-to-basics call and a radical new endeavour; and one that needs to be addressed now. 

“The financial crisis significantly reduced trust in banks,” Dettling says. “We have millennials who engage less and less with banks and want to work for employers with a clear purpose, and we have a changing political environment, changing economies and changing shareholder demands.” 

We know banking is important, she adds, but now we must measure its value. 

Defining what ‘responsible banking’ means is critical if finance is to be the tool to bring about positive social benefits. It is also imperative for the future of banking. There is a commercial value for banks to be seen as trustworthy and socially responsible – consumers want it and banks need it if they are to hire younger talent.  

The way you run a bank must fit within the society in which it operates - Jean-Laurent Bonnafé, BNP Paribas

There is also the question of risk. Being left with stranded assets from investing in carbon-heavy industries as environmental policies change in many countries is a growing danger. And regulation, not just around climate change but also for green and social finance, is on the horizon.

In May, the European Commission adopted a package of measures including a proposal for legislation on taxonomy – a uniting definition of what is considered an environmentally sustainable economic activity. There is also a proposal requiring institutional investors to disclose how they integrate environmental, social and governance (ESG) criteria in their investment and advisory process, and another to improve benchmarks for low-carbon strategies. 

Speaking to Euromoney, a European Commission official says the new rules will fight so-called greenwashing and enable people to invest in ESG products with greater confidence and trust. Crucially, the official says, the goal is to enable the financial industry to meet the demands of society in a measurable and verifiable way. The environmental taxonomy, which will also include some social criteria, will be complete by 2022. 

“Then the focus is expected to be on developing a social taxonomy,” the official says.

Social finance

As the world looks more closely at how banks can have a positive impact on the environment, it is likely issues surrounding social finance will also become more prominent. 

“I’m not sure you can separate those two,” says Magdalena Kettis, head of thematic engagement for Nordea’s sustainable finance group, and part of UNEP FI’s banking committee. “We can see the impact of climate change upon communities in just these past few months of summer.” 

Different regions have tended to focus on one or the other. The US sought to address the social responsibility of banking to some degree through the Community Reinvestment Act in 1977, while the role of finance in the environmental space has largely been ignored. 

In Latin America, social purpose too has come first. Europe, on the other hand, has generally leaned towards environmental policies, as has Asia. 

Kettis says that for these reasons, a global initiative like UNEP FI is important. The 28 banks from the UNEP FI membership that have worked on the first draft of the principles span 22 countries and are of different sizes and models, ranging from Golomt Bank in Mongolia and Banco Pichincha in Ecuador to global banks, such as Barclays and Société Générale, and large Asian banks such as ICBC and Yes Bank. 

US banks are noticeably absent, but Dettling says she is hopeful that by November there could be at least one from the country in the group. 

For our staff it is important to have a sense of purpose that goes beyond just doing the job, earning money and growing the business - Frédéric Oudéa, Société Générale

Currently the principles are being consulted among the 130 UNEP FI members before a launch for public consultation in Paris on November 26. Then comes a six-month global consultation phase, in which the group will engage with banks, banking associations, civil society, regulators and investors before launching the final principles, complete with targets and measurables, at the UN in September 2019. 

It is ambitious, to say the least. 

Dettling says once they are done: “Shareholders, clients, policy makers and investors will all have a clearer understanding of how a bank can be aligned with its role in society and the economy, and what changes need to be made if it is not.” 

So too, presumably, will bankers. 

It has taken 10 years to get to a place where banking’s potentially positive role in society has become a serious talking point. How long will it take us to see a real change in banking? While external agencies might help promote change, real advances in positive impact banking can only come from within the banks themselves. 

The good news is that there exists today a cadre of bank chief executives that take the issue of responsible banking seriously. They all lived through the financial crisis. They all talk to their younger generation of employees, the future leaders of their firms. They see themselves as stewards of their bank, not lifelong dictators. And they know that, increasingly, doing good is good business.

The tone at the top is always important in banking, as regulators long ago realized. There is no guarantee that if senior executives behave responsibly, then all their subordinates will too. But it is almost inevitable that if the leaders of a bank are seen to set their personal economic interests above those of customers or shareholders, to prey upon them in the process and to excuse what looks unethical on the grounds that it is legally permissible, then most people working in the layers below them will follow that dubious example.


What then is the tone from the top of banks on sustainability? 

Take Morgan Stanley as an example. Earlier this year the firm expanded its commitment to reduce exposure to coal mining and announced that it will no longer provide financing where the proceeds would be used for mountaintop removal mining (MTR), nor finance companies that rely on MTR for more than a limited portion of annual coal production. The firm also lobbied for the US to remain in the Paris Agreement. 

Like most other banks, it can parade some big numbers: $16.8 billion in renewables and clean tech financing last year; $20.7 billion in green and social sustainability bonds in 2017; and $15.5 billion committed to community development investments since 2010.

How far does all this pervade the firm and in particular its top ranks?


James Gorman, chairman and chief executive of Morgan Stanley

“At any bank, you could fill all the roles many times over with purely economic actors who don’t give two hoots about corporate social responsibility or the environment. There are plenty of them in every building, goodness knows,” says James Gorman, chairman and chief executive of Morgan Stanley. 

“As a chief executive, you do have to understand what kind of firm you are and I think this is a firm with a good heart. Morgan Stanley does a lot of positive things for society, and there is a bias here towards people who believe in giving something back.”

Market leading

In July, Euromoney named BNP Paribas the world’s best bank for sustainable finance in 2018, noting a company-wide embrace of the sustainability theme that first became notable back in 2011 with the decision to no longer make new loans to coal-fired power plants, which it has since extended to include oil sand and shale gas projects and, beyond power generation, to address deforestation. 

“We have developed a number of sectoral approaches to sustainability, obviously starting with energy but now covering an extensive list of industries and sectors,” Jean-Laurent Bonnafé, chief executive of BNP Paribas, tells Euromoney. 

For example, the bank will only finance companies in paper pulp, agriculture and palm oil that are in some way replacing the raw materials that they use.

Sustainability obviously makes good sense to bankers. Companies that devour resources essential to their performance in ways that ultimately deplete them are, by definition, not good credits. No financier wants to be a long-term lender to, or partner with, companies that destroy the resources on which their businesses depend. 

To sustain themselves, banks rely on operating in economies that produce a dependable supply of individual and corporate borrowers that are good credits and not ruined by the process of borrowing money. 


Jean-Laurent Bonnafé, chief executive of BNP Paribas

Bonnafé puts this market-leading approach to sustainability into a wider context. 

“The way you run a bank must fit within the society in which it operates,” he says. “We are devoting a lot of time to this question, including by engaging with young people and fragile communities. We made a conscious decision to take an organized approach to developing a positive impact strategy. And that is notably why one year ago we set up the company engagement department.”

This department, reporting to the group executive committee and headed by Antoine Sire, who sits on that group exco, works with all BNP Paribas’ business lines to define and implement engagement relating to key fields for the future of society: not just the environment and energy transition but also economic development, social inclusion, diversity and respect of human rights. 

We have a purpose to solve our customers’ problems in a responsible and ethical way, based on a system of values - José Antonio Álvarez, Santander

“This is all becoming even more important because people who we want to employ at BNP Paribas increasingly are asking for a much closer alignment between what they believe and act on in their private lives and the work they do for a living,” says Bonnafé.

“We are making good progress. We pushed hard since 2015, especially on everything related to accelerating the energy transition.” 

Deciding to rein in support for borrowers that may contribute to environmental risk comes, of course, at a cost. “We have given up business. We have given up revenues,” confirms Bonnafé. 

“Now, the essential story is doing new business that is both profitable and has a positive impact on society and the environment.”

Staff ethos

While decisions on responsible banking may come from the top, a number of banks are making sure their entire employee network has a say in the future direction of the firm. 

“Increasingly, for our staff it is important to have a sense of purpose that goes beyond just doing the job, earning money and growing the business,” says Frédéric Oudéa, chief executive of Société Générale.“They see banking as being at the heart of the transformation of the world. That’s why in 2017, out of 145,000 staff, more than 16,000 have contributed time and effort pro bono to society through initiatives organized by the bank. On the question of sustainability, we asked various stakeholders, totalling some 1,500 people, including representatives of customers, shareholders, non-profits as well as staff: ‘What do you expect of us?’ 


Frédéric Oudéa, chief executive of Société Générale

“They came back with five priorities. We should contribute to fighting climate change; develop impact-based business with a focus on inclusion and sustainability; provide our clients with the right service at the right moment, offering safety and protection to their interests and assets; share a governance and culture of integrity centred on clients’ interests and protection; and we should be a responsible employer, including by encouraging diversity. To this we added a sixth priority – to contribute to the long-term development of Africa.”

Société Générale is present in 19 countries in Africa mainly in the north and west of the continent, as well as in Mozambique and Madagascar. It has 3.7 million customers, including 150,000 businesses. Partly, Oudéa sees this as a business opportunity on a continent with two large banking unions in the west and in the centre where businesses operate with one currency, one set of regulations and one central bank. 

“In Africa, we are thinking 30 years ahead,” Oudéa says. “This is a continent that will have two billion inhabitants by 2050. It is arguably the biggest opportunity for Europe and also the biggest threat.” 

Clients want to know your position on these issues so they understand who they are doing business with and their own level of risk - Mike Corbat, Citi

Oudéa does not mention immigration, but the political strains in Europe are obvious and the question few are grappling with is: what can outsiders do to encourage peace and prosperity in Africa so that people are no longer so desperate to leave? 

“Having economic development and stability in Africa is a huge requirement for Europe,” says Oudéa. “That is why all the providers of public money are increasing their budgets for Africa.”

On the first priority the bank’s stakeholders established – fighting climate change – Oudéa, one of the longest-serving chief executives of any large bank, takes a long perspective to read encouraging signs.

“Ten years ago, when we first started talking about financing renewable energy, a lot of the projects depended on public subsidy and the underlying technology was not always that convincing. Today, you can finance renewable projects with no subsidies and see them achieve a cost of production lower than traditional energy companies, which are themselves now changing. We saw traditional energy companies diversifying from extraction to renewables. And if we don’t recognize this and help finance the transition, we may risk losing our energy companies. We have put this at the heart of our strategy.”

If you talk to Santander chief executive José Antonio Álvarez, it soon becomes clear that sustainability is not merely a consideration the bank embeds into deciding whether or not to advance loans to companies in the energy and other climate sensitive sectors. The biggest question of sustainability hangs over the bank itself. 


Santander chief executive José Antonio Álvarez

“You cannot be sustainable as a bank unless you contribute to society,” Álvarez tells Euromoney. “It’s not just about having lending programmes for the energy and other sectors. What we focus on is responsible banking. We have a purpose to solve our customers’ problems in a responsible and ethical way, based on a system of values. This is important for all financial institutions. Indeed, it is now a pre-condition for sustainability in the banking business.” 

Álvarez points not to financing wind farms but to Santander’s support for higher education through a universities programme first set up in the late 1990s. Santander now runs the largest scholarship programme financed by any private company in the world, according to the Varkey Foundation in cooperation with Unesco. Last year, Santander financed close to 40,000 grants and university scholarships, focusing on improving access to higher education for the disadvantaged. It recently also set up a new collaboration network with 40 universities to help campus entrepreneurs develop business ideas, share best practice and attract investment and even customers.  

Companies that balance all their constituencies, including communities as well as shareholders, customers and employees, perform better over time - Brian Moynihan, Bank of America

He picks out one example of how this embrace of universities may contribute directly to the bank itself and its attempt to foster responsibility and inclusion as a way of ensuring its own sustainability as a business. Brazil is a multi-racial society, but the black population is under-represented inside the country’s banks, including Santander, relative to its size. 

“Partly that is due to relatively low academic achievement,” says Álvarez. “So, we are trying to build an academy in Brazil to start to address this and improve racial diversity.” 

Santander has been undertaking a business transformation whose driving aim is to increase the loyalty of customers and employees – a broadly defined responsible approach is at the heart of this. 

“The next step is to embed responsible banking in everything we do as part of the transformation of the bank,” says Álvarez. “It is actually easier to change your whole board of directors than to embed behaviour change in 200,000 employees. But we take this very seriously and are committed to it. For example, only 60% of bonuses depends on what financial result people achieved, while 40% now depends on how they achieved it.”

Broadest footprint

Of the global banks, it is Citi that has the perhaps the broadest footprint – on the ground in 100 countries and operating a commercial bank in 32 of those. Since many of those countries will be developing with high rates of poverty and represent opportunities for economic growth, it stands to reason that financial inclusion, affordable housing, infrastructure and job creation have been the bank’s focus. 

“We take responsibility seriously because of the number of places we come to work,” says Citi chief executive Mike Corbat. “You can’t come in and say: ‘We want to be part of the market’ and then not act as a good corporate citizen.”


Citi chief executive Mike Corbat

Corbat talks about Citi’s work – from sustainable financing to multi-year renovations of the bank’s own headquarters in Tribeca, New York, as simply being “the right thing to do”. That includes opening up public discussions about the financing of firearms.

But does all this focus on corporate responsibility pay off? Because in the end, if banks cannot show shareholders the value of doing the right thing by the environment or community, then these efforts are unlikely to be sustainable.

“Can we point to winning business because of our own corporate responsibility? I would say it’s our clarity around governance and these issues that wins business,” says Corbat. “Clients want to know your position on these issues so they understand who they are doing business with and their own level of risk, and we’ve been very clear on what we are doing and why.”

Pragmatic view

As bankers weigh in on the world’s social and environmental challenges, it is hard to discern whether they are doing so because it is good business, good ethics or simply a way to change their identity. Playing at being good citizens is a way to deflect the enduring criticism since the financial crisis that their industry is full of crooks that preyed on customers, looted shareholders and then came pleading to taxpayers for a bailout. So, it was refreshing to hear Brian Moynihan, chairman and chief executive of Bank of America, take a pragmatic view when he spoke to Euromoney earlier this year. 

“We committed $100 billion to sustainability before it was a thing,” Moynihan tells Euromoney, “because embracing ESG is the right thing to do economically. This is not a fuzzy, feel-good issue. Companies that balance all their constituencies, including communities as well as shareholders, customers and employees, perform better over time.” 


Brian Moynihan, chairman and chief executive of Bank of America

In the energy sector, growth rates will slow in fossil fuels and eventually reach a tipping point, Moynihan says. Lending decisions need to take that into account. 

“Now, you can’t go off a cliff on this,” he says. “In the US, 30% of electricity is still coal powered. But we have to finance the transition to solar and other renewables. That transition may take time, but it won’t happen at all unless we start somewhere.” 

Increasingly, sustainability considerations will influence credit availability to all companies, not just the energy sector. 

“We deal with real companies,” says Moynihan. “If they work with us and try and take their carbon content and waste production down, then that’s fine by us. But if companies tell us they don’t care about any of that and won’t change, then we have to take that into account too.”

Bank of America defines its approach to ESG as being about how the bank deploys its financial and intellectual capital and its technology to benefit the communities it serves. That extends far beyond financing the transition to renewable energy. 

Sometimes attempting to serve the community and do the right thing can be controversial. In setting themselves up to judge the right thing, bankers may have to count the cost in lost business and even ill will among some customers, employees and shareholders.  

I still don’t think people understand how to use the levers of the banking system to be a force for positive change, or maybe they don’t understand what banking is capable of - Ron Grzywinski, ShoreBank

In February this year, 17 students were shot dead at Marjory Stoneman Douglas High School in Parkland, Florida. The sheer eloquence of the young survivors offered hope that this time something might actually be done. 

Bank of America told certain corporate clients – having also discussed it with the bankers that covered those companies – that it could no longer continue to finance them if they produce military-style weapons for sale to civilians. The bank was a lender to Remington, just then coming through a bankruptcy that Bank of America was contractually committed to support. Rumours emerged that this support might be short-lived as it and other lenders considered new lending policies. 

Plenty of businesses, and even some of the various banks’ own staff, disagreed with this approach and took complaints to congressmen and senators.

In August, the State Bond Commission of Louisiana prohibited Bank of America and Citigroup from participating in an upcoming bond issue, with state treasurer John Schroder claiming their policies amount to an infringement on the second amendment rights of Louisiana citizens. 

Responsibility can come at a price; just how committed banks are to sustaining it remains to be seen. They are certainly dedicating resources to figuring it out. With committees, roundtables, associations and principles, even Dettling admits that the banks are overstretched. 

As one banker points out: “It says something about commitment when your bank lets you go off for six months to work on writing principles.” 

But there is a larger issue at hand that all this talk of sustainable finance as something new to banking distracts from. And that is the even more complex discussion of whether or not, in order to better serve society, the banking industry needs to change its model. 

Social mission

Ron Grzywinski knows a thing or two about directing banking towards serving society. He was one of four individuals who put together an investor group to purchase South ShoreBank in Chicago in 1973. 

The bank had been redlining low-income, predominantly African-American neighbourhoods as it focused on profits. Grzywinski and three others successfully took over the bank, turning it into a financial institution with a social mission at its core – and one that still made a profit. It was, perhaps the original impact bank and certainly the first community development bank in the US. It also inspired the creation of Community Development Finance Institutions. 

During its 37 years of operation, ShoreBank (as it was later renamed) played a critical role in stabilizing and rebuilding many of Chicago’s low-income neighbourhoods, not through side investments in affordable loans or through charitable donations but through every part of its business model. It also bought a West Coast bank that became the first bank to focus on green finance. 

As a veteran of banking, Grzywinski, now 82 years old, says he remembers specifically a shift in the banking industry model in the late 1970s and 1980s. 

“At some point, bankers and investors realized that banking could become a growth industry instead of a utility,” he says. “It became seen as a high-profit business, and that was when the role of banking as primarily a service industry changed.”

In the US, deregulation followed, as did consolidation and the removal of the Glass-Steagall Act; and a small number of banks became large profit-making machines with their chief executives commanding million-dollar salaries. 

Mary Houghton, who was a co-founder of ShoreBank with Grzywinski, says she is surprised in this current era, when the focus is on investing in companies with social and environmental missions, that there has not been more attention drawn to the role of banking within broader society already, and says there seems to be a reluctance to take on banks.  

Profits should be a consequence of doing the right thing professionally, ethically and in line with human values - Marcos Eguiguren, GABV

Grzywinski says he remembers in 1976 being in a room with 30 or so high-level activists and politicians just before Jimmy Carter won the US presidential election. They were discussing the creation of a national development bank in the US, including other ideas that would later go on to become the Community Reinvestment Act (CRA), ensuring banking would reach low- and moderate-income neighbourhoods. 

“I raised the point that we could, instead of having to establish a national development bank, just release the energy of the entire banking system by reorienting it back towards society, but that was deemed inconceivable by a majority of the participants,” says Grzywinski. “And I still don’t think people understand how to use the levers of the banking system to be a force for positive change, or maybe they don’t understand what banking is capable of.” 

Houghton says there is no question of the value banking has. Indeed, both she and Grzywinski have worked in banking and in banking regulation for years because they are convinced that banks are the vehicle through which to best answer society’s challenges. 

“Overwhelmingly, banks are the most ethical and fairly priced source of loans for houses or businesses,” says Houghton. “They are democratic because they are federally chartered and, other than credit unions, there really is no alternative,” she says. 

In addition, banks have trillions of dollars in deposits (about $12 trillion in the US). Mobilizing that money towards social and environmental good through a business model oriented towards mission would have far larger impact than all these initiatives and commitments ‘on the side’. 

The challenge, however, is that the models of the largest banks, which are now so big that there is no room for disruption, are focused solely on profit generation; and that has come at a cost to society and the economy, says Houghton. 

Perhaps putting the spotlight back on bank responsibility can breathe life back into the movement that she, Grzywinski and others had hoped to create in the 1970s, but it will need more than taxonomy and definitions. 

“For all the talk of CSR and sustainable finance, we’re missing the point – it’s the core business of banking that has the power to make change and so it’s the core business that needs to be looked at,” says Houghton.


So why aren't we looking at it? In magic circles, it is called misdirection – the magician will make his right hand so enticing and engaging for the brain to focus on that people won’t see whatever is happening in his left hand. Where magicians use lighting and stage effects, in finance the tools are story, lack of transparency and zeroes. 

When most of us deal in tens, hundreds or thousands of dollars or euros, it is not surprising that when we hear that a bank gave $200 million to charity or financed $11 billion in green bonds, we are impressed. We entirely miss that these numbers are a tiny fraction of bank profits and assets. 

To take the US as an example, the 13 largest retail banks listed in the S&P500 have made $641 billion dollars in profit since 2008 (adjusted for real values). The largest four banks – Bank of America, Citi, JPMorgan and Wells have made $513 billion of that. Last year alone they made $58 billion (dented by Citi’s loss of $6.8 billion). 

All of a sudden, $250 million in philanthropic giving from JPMorgan’s foundation for the year is thrown into perspective – it is about 1.1% of the bank’s profits. At Bank of America, where giving is on average $200 million a year in non-profit grants, that again is about 1.1% of 2017’s profits. 

It is overly simplistic perhaps to cite a bank foundation’s giving as a measurement of its positive impact on society, but these numbers are thrown around for a reason – and it is presumably to remind us of the good work banks do. 

To make these numbers more confusing, lines are often blurred in annual reports between CSR and for-profit financing. Reports cite confusing timeframes because projects tend to take longer than one year, or will set out large numbers but then explain it is over a 12-year period; and some analysts suggest that there may be some double counting in the figures. It is difficult to establish how much of profits or balance sheet these banks are committing and even harder to make comparisons with peers to get a broader industry view. 

But while these seemingly large amounts capture our attention, the value of any bank to society and the economy is far more than the sum of its donations, its green bond financing or its impact investment funds. 

Houghton’s point is that it is the day-to-day business where the difference is made: the loans to businesses that have a positive function in society and create sustainable market-rate jobs; financing of affordable housing; lending to non-profit groups; as well as the basic but essential enabling of people to transact with one another. 

But at present, despite being in an age of data, we have no way of measuring the impact of the banking model on society – positive or negative. 

And while it is easy to state that a bank has financed $11 billion in green bonds, the impact of its financing on the world’s CO2 emissions remains hidden. 


Similarly, we may know that a bank has made several million dollars in loans to low-income households, but we don’t know how those loans helped an individual, we don’t know the fees they were charged and we don’t know how many loans the bank didn’t fund. The lack of transparency and lack of data need to be addressed. 

Dettling says the UNEP FI’s principles will begin to drill into these questions. 

“There will be an assessment of where in their businesses banks have the most potential impact on society’s goals – positive or negative – and then from there, they will be setting targets towards making a transformative contribution along the lines of the SDGs,” she says.

Those targets need to be ambitious in terms of scale and timeframe, with the ability to publicly report against them, she says. 


Marcos Eguiguren,

Groups such as the Global Alliance for Banking on Values (GABV) can also help. Spurred by the financial crisis, the alliance was set up in 2008 as an affiliation of initially nine banks whose aim was “to collectively raise the voice that there is a different way to do banking that still can be profitable,” says executive director Marcos Eguiguren. 

GABV has developed a scorecard to measure the impact of its 54 members from around the world – all independent deposit-taking institutions and mission-oriented towards the environment, society or both. Eguiguren says GABV plans to open the scorecard up to be considered as an industry standard. In Malaysia, efforts are underway to integrate the scorecard into the larger banking system, for example. 

But if it is data we need to see if banks are committed to society under their current models, we already have it – we are just overlooking it. This is the great misdirection. 

Our eyes and ears are captivated by engaging narratives delivered in charming 30-second videos of people whose lives have been changed by the bank’s good deeds, while over in the left hand is data that shows the world’s banks have paid out over $300 billion in fines since the financial crisis

A report from Keefe, Bruyette & Woods released early this year showed that Bank of America has paid out $76.1 billion in fines since the crisis, JPMorgan has paid out $43.7 billion, Citigroup $19 billion and Wells Fargo $11.8 billion. 

And it is not only the US banks. The report says Deutsche Bank has paid out $14 billion, RBS $10 billion and BNP Paribas has paid out $9.3 billion. Unsurprisingly, Wells Fargo’s marketing team is not making vignettes for social media of a customer who had their house mistakenly repossessed or lost their car and job as a result of the bank’s wrongdoing. 

As George Bridges, senior adviser to the group executive chairman at Santander, and part of the working group on UNEP FI’s Principles for Responsible Banking explains: “It is really important when we think about responsible banking we don’t overlook the basics – that is making sure we have brilliant risk management and ethics. It’s no good delivering profits with a purpose if, in your day-to-day business, you’re not taking care of those. In terms of wanting to heal society, the banking industry absolutely needs to get that right.”

Changing the model cannot be done by a bank chief executive alone. It requires a complete mindset shift across the financial industry – and indeed in broader areas of industry. It calls for a different approach to economic theory and even sustainability, says Eguiguren. 

“Our interpretation of sustainability is based around continued profits first, world second,” he says. “Instead, profits should be a consequence of doing the right thing professionally, ethically and in line with human values. We’d have to move to an economy where profits and shareholder value aren’t the first thing we focus on.”  

I do wonder if they may have got a little bored with their day jobs. My philosophy is: just run the company. It’s a pretty full-time task - Chief executive of a G-Sib

It may mean profit expectations of shareholders have to be tempered, although the average return on equity of GABV members from 2003 to 2017 was similar to that of the global systemically important banks (G-Sibs), he points out. 

To really shift that mindset will also require a whole generation of change, including at business schools says Eguiguren. 

“It requires revolutionary discussions around syllabus,” he says. “It was not enough to just add on a course in ethics after the financial crisis. We need to embed these questions of ‘What is a bank’s responsibility to society?’ and ‘How does it best achieve that?’ into financial theory.” 

It also requires attracting people into banking that are committed to putting finance to work for society – something the industry has struggled to do. As Bridges points out, attaining responsible banking will be as much about changing culture as it is about changing laws.

Grzywinski suggests incentives could also be the way to instigate change faster. In the case of US banks, “could those with higher social-performance records access lower interest rates when borrowing from the Fed? Or could those with more CRA credits offer higher levels of FDIC insurance?” he asks. “There would be many better ideas than these if we even began to talk about how to incentivize banks to take more responsibility.” 

But he agrees that the UNEP FI Principles for Responsible Banking are a positive start because they will provide banking consumers with greater clarity about what their financial institutions are doing with their money. 

“Armed with that information they may well start to move their deposits to more socially aligned banks – that alone could force the banking model to shift to one that is more genuinely focused on helping society and its myriad of challenges,” he says.

New responsibilities

An overhaul of the whole model probably goes much further than any leading bank chief executive is prepared to contemplate today. But there is no question that CEOs are thinking in new ways about the sustainability of their own businesses as they also consider their institutions’ roles in mobilizing finance to sustain the environment and how best to be socially responsible.

The question on the mind of one chief executive of a G-Sib not named in this article and who asked to remain unattributed is how to respond in an age when financial institutions are being called constantly to explain senior executives’ views on all manner of topics aside from the interest rate outlook, financial asset valuations and volatility. 

“We have a sizeable presence in the US. Should I be out making speeches about semi-automatic weapons?” the chief executive asks. “At the moment in the US, people have the right to own and carry arms. Until there is a change in that, I have a personal view. Is it part of my job to talk about that or deferred action for childhood arrivals or gay rights? Where’s the limit? Do people also want to know what I think about abortion or planned parenthood or Charlottesville?”

It is fairly obvious that this banker is highly reluctant to talk about any of this. Although the questions are rhetorical, this chief executive seems genuinely uncertain how to measure the new responsibilities that come with that position. 

“If you say nothing, does that mean your employees are going to think you don’t care?” he asks.

Whether and how this banker ever answers that question, they are not a likely candidate to become outspoken on social issues, unlike certain peers in the top jobs at large European and US corporations.

“It sometimes seems to me that being asked to express your opinion on these topics must be very seductive and that there are certain people with the money and the power and the position and the access to burnish their own reputations,” he says. “I do wonder if they may have got a little bored with their day jobs. My philosophy is: just run the company. It’s a pretty full-time task.”

The question remains: just how will the task of running a big bank change over the coming years, what will its purpose be and what broader impact, if any, does it need to make to be a successful business? The answer probably will not be fully known until long after this chief executive has handed on the reins.

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