Sustainability Stewardship and Product Innovation in the Financial Sector.
International Finance Corporation
|Financial institutions are increasingly taking a leadership role in sustainable finance as growing evidence emerges, directly linking environmental and social issues in lending and investment practices to financial profitability. Environmental and social dimensions of risks, which are often overlooked, have the potential to adversely affect a financial institution's bottom-line profits. By systematically including these risks in the loan or investment appraisal process, financial institutions will strengthen their portfolio by focusing investments on companies with high environmental, social and financial performance. This will reduce the risk of non-performing and default loans as well as provide increased share value. At the same time, there is a tremendous business opportunity in financing companies that supply sustainability-related products or services. Sustainable finance offers financial institutions a way to expand their portfolio, while also differentiating themselves from competitors and improving their reputation among key customers and stakeholders. |
In particular, sustainable finance presents tremendous business opportunities for emerging market financial institutions that are undergoing drastic market reform, including privatization, consolidation, and market liberalization. This paper will focus on the drivers and barriers for financial institutions in East Asia to adopt sustainable finance practices, the necessary capabilities required for implementation and will provide an overview of training and capacity building programs in place to support institutional learning.