Values Based Banking: Bringing the voice of the citizen into finance
Institute for Social Banking & UNEP
Today’s financial system is in many ways too large, too complex, and too removed from the real economy. It has become focused on short-term profit maximisation, it does not pay enough attention to social and environmental risks, and it leaves 2.5 billion people without access to adequate or any financial services.
Banks play an important role in the economy intermediating between savers and borrowers. As such the role banks can play in contributing to or undermining sustainable development is profound. Values based banking is purposively oriented towards the development of a sustainable economy. It is a diverse movement drawing in community banks, ethical, green and socially oriented banks and including cooperatives, credit unions, privately owned banks, B Corporations and public companies. Values based banking is not determined by organizational form but is characterised by a culture and performance model based on:
Economic, social and environmental performance as a ‘triple bottom line’.
Serving communities and the real economy and enabling new business models.
Long term relationships with clients and a direct understanding of their economic activities.
Long term, self-sustaining resilience to outside disruptions
Transparent and inclusive governance
Values based banks have understood something that is missing in mainstream banking: that banking is a combination of responsibility for society and making reasonable profit to generate fair livelihoods. They have demonstrated that this approach can be well-governed and profitable, achieving success on both narrow financial measures as well as broader social, economic and environmental impacts.
We identify four values that need to be at the heart of a sustainable, or values based financial system: sustainability, transparency, diversity/fairness and inclusion.
To achieve its potential, values based banking has to broaden its outreach and diversify its portfolio by catering to stakeholders of both a values based economy and a market-oriented one. The paper highlights key channels for scaling up the impact of values based banking:
1. Growing the values based banking sector
2. Influencing mainstream banks to adopt sustainable strategies
3. Building capacity of civil society to catalyse change and hold the system accountable
4. Educating and engaging consumers
5. Accounting for environmental and social impacts
6. Creating policies and regulations aligned to sustainable finance