Sustainability is about ensuring that the commitment to meet the UN Sustainable Development Goals (SDGs) by 2030 does not remain an empty pledge. Meeting these goals will require continual efforts and the involvement of all parties. Indeed, sustainable finance is crucial to the communities that we serve as savings and retail banks. There is the need to address growing inequality, unequal economic inclusion, and insufficient investments in all kinds of infrastructure, not to mention dramatic loss of biodiversity and air pollution. The impact this is having is noticeable for WSBI-ESBG members, as we are present in remote areas, close to the people, and focus the majority of our work on SME and private household lending. Working for a sustainable future, in particular tackling climate change and strengthening social cohesion, is a priority for citizens, businesses and local communities in our towns and regions.
Due to their specific role, position and social tradition, savings and retail banks are best placed to understand that there is no such thing as environmental sustainability alone. Sustainability must be holistic and should integrate social and environmental objectives. It should also incorporate good governance principles and a commitment for all financial actors to be good corporate citizens.
Locally-focused savings and retail banks are built on traditional business models that are centred on being responsible and conscious of the needs of society. We play a crucial role in supporting inclusive and sustainable societies, as we provide fundamental banking services, such as bank accounts, loans and financial advice and education, to our customers – primarily private households, SMEs and local/regional communities. Serving all kinds of customers, we contribute to strengthening social cohesion and ensure that no one is excluded from basic access to financial services. Savings and retail banks have a mandate that goes beyond mere profit maximisations. We endeavour to maximise our positive impact for all stakeholders with a long-term horizon.
In Europe, retail and savings banks are the natural partner to SMEs and we know that SMEs are fundamental for innovation. Our extensive practical and day-to-day knowledge of local industry and households have given us the tools to provide SME lending, as well as give SMEs our support in making the transition to a more sustainable future. Because of their share in emissions, households should also be offered attractive solutions to reduce their emissions. Green mortgages and green loans are examples where WSBI-ESBG members can provide support and investment in local communities. We are working hard on providing even more tools that investors and customers need to become more sustainable.
As our business models traditionally have been responsible and conscious of the needs of society, we are particularly interested in policies fostering both environmental and social aims. We urge policy makers to adopt policies adapted to the specificities of retail banking and supportive of a diversified banking sector including a reasonable sense for the principle of proportionality. This is of crucial importance to WSBI-ESBG’s regional- and locally-focused member banks so that we can continue to provide vital financial services in our communities.
The importance of sustainable finance is being recognised globally as a way to fight climate change, but banks also need help in the transition to a low-carbon future. Therefore, we appeal to policy makers to give enough leeway and flexibility to adapt to the transition. Orderly implementation is crucial: taxonomy is a necessary first step before incorporating ESG considerations in financial regulation. In order to allow a smooth transition towards a low-carbon economy a dynamic single set of definitions is needed and should define not only green finance but also how an activity contributes towards sustainability. We also appeal to policy-makers to provide the basis in order to foster a plan to move towards low-carbon financing and incentives for banks, SMEs and households alike to encourage a sustainably-oriented mind-set.
Banks are more than willing to play their part, but the interests of banks, national governments, international policy makers and supervisors need to be aligned. We need to work with an informed population who understand the risks we are facing. Overall, we warmly welcome the objective to channel more funds into sustainable projects. This should be done by giving true incentives to the real economy, private households and SMEs to make sustainable solutions attractive at local, national and global levels.
A good example could be the agricultural sector, which is under strain; more food is needed for a growing population and the change in weather due to global warming increases the risk of crop shortages and supply of natural resources, as well as an increase in high carbon emissions as a consequence of increased productivity. More capital is required to shift to a more sustainable economy – and this will imply important changes to key sectors such as agriculture, housing and transport.
Retail and savings banks are committed to support fully the transition to a sustainable economy. Additionally, in our view, legislative initiatives should always include cost-benefit and impact analyses, pursuant to the better regulation principles, so as to ascertain that greening the economy is fully coherent with the social aims supported by retail banks. At the same time, we trust that decision makers know that some changes, such as updating IT infrastructure, reviewing risk assessments and reviewing financial advice, take time and additional resources to implement. Furthermore, some flexibility in the implementation of the new legislation would accelerate our move forward in supporting the economy to become more sustainable in the near future.
THE WAY FORWARD
Savings and retail banks are convinced that action is needed now and that they are especially well positioned to contribute to sustainable objectives, in particular strengthening social cohesion and tackling climate change. Done right, the transition to a sustainable economy may put Europe on the path of sustainable growth, proving the investments needed for current and future generations. For savings and retail banks this will imply playing an active role in financing energy savings and investments in renewable energy, funding new approaches to mobility, while ensuring the highest commitment to financial inclusion.
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