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Financial regulation

Banking and Sustainability: Time for Convergence

September 2015 – A policy briefing on the links between financial stability and environmental sustainability.

 

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In 2014, the UNEP Finance Initiative (UNEP FI) and the University of Cambridge Institute for Sustainability Leadership (CISL, working with and on behalf of the Banking Environment Initiative – BEI) commissioned a study entitled, "Stability and Sustainability in Banking Reform – Are Environmental Risks Missing in Basel III?". 

The study was conceived in recognition of the growing number of banking regulators around the world that have started to act on environmental and social issues, and aimed to assess the role that supranational banking regulation (i.e. Basel III) might play in this domain.

The resulting report pointed to the material links between financial stability and environmental (and social) risks, which are already being experienced, and that are likely to become more pronounced and complex in the future. It offered several recommendations for supranational and national banking regulators accordingly.

Since then, bilateral engagements with a number of banking regulators have taken place. In addition, an Expert Dialogue between the worlds of Science and Finance was convened jointly by UNEP FI, CISL and the UNEP Inquiry into the Design of a Sustainable Financial System ('the UNEP Inquiry') in April 2015, with a view to refining a common understanding of the stability-sustainability link and to exploring how this link might be addressed going forward.

This briefing provides a synthesis of the current state of thinking on the topic, based on the work above. It is intended as a means of sharing key findings with policymakers and of engaging them on the matter.

Comments are welcome and should be sent to: , and .

Professor Alexander presents key findings on the report 'Stability and Sustainability in Banking Reform'

last modified Jul 01, 2015 07:42 PM
June 2015 – Professor Kern Alexander, lead author of ‘Stability and Sustainability in Banking Reform: Are Environmental Risks Missing from Basel III?’ gave a 10-minute overview of the main conclusions of his report at the Cambridge Expert Dialogue in April 2015. A video of his presentation is now available.

 

The Cambridge Expert Dialogue saw experts from around the world representing central banks and regulators, financial institutions and academics from a range of disciplines came to Cambridge to build on the work initiated by the Banking Environment Initiative (BEI), together with UNEP FI, Stability and Sustainability in Banking Reform: Are Environmental Risks Missing from Basel III?’.

 

 


Stability and Sustainability in Banking Reform: Are Environmental Risks Missing in Basel III?

October 2014, report – The BEI’s focus to date has been driving sustainability standards into banking products and services by working with groups of leading customers. Its work in soft commodity supply chains has seen banks aligning with clients to develop commercially viable trade finance products and services that incentivise sustainable resource management. However, it has always been clear that those who regulate the financial system have a role to play in identifying and mitigating the potentially destabilising effects of environmental risks across the banking system as a whole.

 

This report aims to trigger a deeper reflection amongst financial policymakers and regulators concerning the relevance of systemic environmental risks to banking sector stability. Published by the Cambridge Institute for Sustainability Leadership.

Download the full report (English)

Since the financial crisis of 2008, financial regulators have increasingly been enacting policies and regulations to target environmental risks, especially in some of the major fast-growth economies. Recognising the growing momentum behind this trend, the BEI, in partnership with UNEP FI and with support from Bloomberg, decided to initiate an independent process to look at these issues and the ways in which regulators worldwide might respond to them.

The resulting study, authored by Professor Kern AlexanderCambridge Institute for Sustainability Leadership (CISL) Fellow and Chair in Law and Finance at the University of Zurich, assesses the links between systemic environmental risks and financial stability. It offers insights into how some members of the Basel Committee are already acting on these links. Opportunities for international coordination and collaboration on these approaches are suggested.

This study has profound implications. CISL and the BEI, together with their partners, look forward to playing an active role in further analysis and discussion to determine the feasibility of implementing its recommendations.

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Professor Alexander presents key findings on Stability and Sustainability in Banking Reform

Contact

Thomas Verhagen, Senior Programme Manager, Finance Sector