Principles for Responsible Banking

Banks and financial institutions are the backbone of the modern economy. But, as we have seen through the years, this importance extends beyond the banking basics of simply providing saving and lending services and products.

It’s a well-known fact that a well-organised, robust, and active financial sector provides security, advice, and confidence to any economy; all designed to empower clients (retail, commercial, and corporate) and promote financial stability. But what about the wider community? The global community?

(We’re not talking specifically about corporate social responsibility, although, the merits of a proactive and in-touch CSR programme in transforming the world and safeguarding the future can never be overstated.)

We’re talking about the overarching responsibilities of a bank, as both a corporate entity and a member of society, that go above and beyond what is typically expected of them.

We’re talking about the Principles for Responsible Banking.

And I’d like us to talk a little about them and what they ultimately mean in shaping the narrative on achieving sustainable development goals.

What Are the Principles for Responsible Banking?

A little over a year ago, September 2019 to be exact, in an attempt to bring financial institutions and the like in line with global development objectives, several leading banks and the United Nations created the Principles for Responsible Banking.

The plan is relatively simple in its concept. Through the United Nations Environment Programme Finance Initiative (UNEP FI), a partnership between UNEP and the global financial sector, real steps would be made to mobilise private sector finance for sustainable development. The Principles, therefore, form part of this strategy.

By creating a common framework to guide banks in growing their business operations and reducing risks, the Principles serve two distinct functions: they align banks all across the globe in the pursuit of sustainable development and they further pave the way for substantive transformation to a more responsible and invested banking industry.

The Principles define clear accountabilities and require each participating bank to establish, communicate, and most of all, work toward achieving set targets. They include:
• Alignment – Align business strategies to be consistent with, and contribute to, individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement, and relevant national and regional frameworks.
•Impact and Target Setting – Increase positive impact, reduce negative.
•Clients and Customers – Encourage sustainable practices and enable economic activities for current and future generations.
•Stakeholders – Partner with relevant stakeholders to achieve goals.
•Governance and Culture – Implement and champion effective governance and a culture of responsible banking.
•Transparency and Accountability – Be transparent about and accountable for positive and negative impacts and contributions.

The response was overwhelming as 130 banks, with a combined asset hold of US$ 47 trillion dollars signed up back in September 2019. These banks, who represent more than a third of the global banking industry, also represent a paradigm shift in thinking, in that they recognise that their clients’ and stakeholders’ expectations of what being a responsible bank means had evolved. What’s more, with the creation of the Principles, they put in writing their commitment to change.

At present, more than 185 banks, including Republic Bank, have joined this movement for change; each doing their part – individually and collectively – to help bring about a future where the banking community can make the kinds of positive contributions that matter. It’s definitely a good start.

The Principles and Republic Bank

So, the Principles are a guide. But for them to be an effective one, there must be that transition from plan to action; strategy to success. If the global banking industry is to respond to, drive, and benefit from a sustainably developed economy, then each participant must understand (and more importantly, embrace) their roles and responsibilities in shaping that future.

When the Republic Group signed on to the Principles in October of this year, we were in fact quite proud to do so as both a long-time proponent of responsible banking and the first signatory in the English-speaking Caribbean. We were guided by the hope that the Group, alongside others that join the cause, could and would make a difference in poverty reduction, providing holistic education, elevating the roles of women in business and society, empowering the socially marginalised, preserving and protecting the environment, and promoting sustainable blue and green economies.

In many ways, it was a matter of further committing to doing all that we can to bring about a more inclusive society founded on human dignity, equality and sustainability in the use of natural resources so that we all thrive. Traits that have come to take on even greater importance in a world currently in the throes of a pandemic with serious socio-economic implications.

Human dignity in the way we treat and interact with each other – regardless of race, creed or sexual orientation. Equality, as a means to empower all facets, all relevant and all important to any long-term vision of a society where each member is given both the opportunity and the means to add value. Sustainability as a long-term objective, a pursuit to guide, nurture and protect future generations; viewing what we do now as building blocks for what is to come next, which should always be an improvement over what came before.

All as a way of shaping a brighter future…

The Future

Lincoln, said, “The best thing about the future is that it gets here one day at a time.” As we chart this future, at the Group level and as a developing nation, we have to be mindful that we have only skimmed the surface in terms of unlocking the true potential of the Principles. We have only just begun.

Even as we go forward, the best way to realise the future we seek is for us to embody the Principles daily, setting realistic and achievable targets that will carry us forward into 2030 and beyond, and ultimately position ourselves among the Principles’ most vocal proponents in making a positive and long lasting difference.

Given the fact that the banking sector provides over 90% of the financing in developing countries and over two thirds worldwide, the Principles are, without a doubt, a crucial step towards meeting the world’s sustainable development financing requirements. Most definitely, this is all still very new and very much a work in progress. But it is safe to say that the underlying ask is for financial institutions (us) to take a good and honest look at how they operate today and take the necessary steps to operate tomorrow.

What are your thoughts on the Principles for Responsible Banking? What are some areas that you think banks and financial institutions can have profound and long-lasting impact? Let us know so we can explore them in our next talk.