Corporate responsibility: For banks to change, everyone must change

News and opinion on finance

In November, the Pandora’s box of ‘what is a bank’s responsibility to society?’ will be opened when the United Nations Environment Programme Finance Initiative (UNEP FI) launches its Principles for Responsible Banking for public consultation. 

In some ways, it is amazing we are at this point where banks around the world are working with UNEP FI to create a framework around the role of banking; and in other ways it’s shocking that it has taken us so long to get here. 

We seem such a long way off having a banking industry that we can call ethical. There have been more than $300 billion in fines since the financial crisis. Just last year, EU and US banks were fined $11 billion, according to Capital Performance Group in Washington DC – and we look set for more of the same this year. That was down from around $30 billion in the previous two years, but it’s still billions in fines, and we haven’t even counted lawsuits filed and settled. 


It feels a little like basic banking ethics have been brushed aside for now as we enter a new arena, that of greenwashing: something that the European Commission is seeking to address with its taxonomy proposals for environmental finance and environmental, social and governance investment criteria in general. It is clear that 10 years after near total financial meltdown still few of us trust banks. 

Will it ever change? I’m not convinced. For all the wonderful people I meet at banks trying to bring about change, their focus is still on profit. Yes, the focus is also on mission, but, let’s be honest, if a social or environmental investment is not going to make good returns and doesn’t serve bank PR, it won’t be considered. On the other hand, if an investment makes good returns but does not fulfil a social purpose, that business is still getting done. 

Whatever we are told about marrying profit and purpose, it is most definitely not balanced. And why not? Because, banks will argue, they are beholden to shareholders.  

The UNEP FI’s principles for responsible banking give us a shot at really reorienting banks back to society again, not through their pet projects but through their daily business 

Indeed, the financial institutions that operate ethically – lending to low- to moderate-income families and small businesses, providing full transparency around diversity, carbon footprint and pay – have an entirely different structure to those that hold 99% of our assets. 

Banks such as Triodos have a trust that issues shares and has a board voted for by those shareholders – and that trust is the one that votes at AGMs. The purpose of the trust is to ensure the bank is ethical, mission-based and running a sustainable business – and profitable. The purpose of traditional bank shareholders is to make sure the bank makes profits and pays a dividend. You cannot begin to shift a bank’s purpose until you shift that of the shareholder. 

If there is any doubt about whom banks serve – society or shareholder – one need only look at dividend payouts and share buybacks since the crisis. About one third of profits have been paid out in dividends – the same with share buybacks. No wonder shareholders don’t seem to blink when billion-dollar fines are doled out. 


It is easy to blame shareholders and, yes, more are becoming active and taking banks to task on their role in supporting high-carbon industries or over diversity issues – and that is great, but is that it? 

Maybe it is for now. Maybe this is as far as we are going to push banks for the time being. In the 1970s there was a push for radical change in banking in the US and it never really took off. It is similar in that respect to the environmental movement. 

Here we are more than 40 years later and we are having another bash at it. We are probably too late on the environment sadly, but the UNEP FI’s principles for responsible banking give us a shot at really reorienting banks back to society again, not through their pet projects but through their daily business. 

When I ask around, I cannot find anyone who is confident things will change dramatically; not bankers, certainly not customers and obviously not journalists. 

It just feels too insurmountable, they say. To change banks, you need to change shareholders; to change shareholders, you need to change government policy to handle pension fund obligations; and to change governments, you need to change voters.

I love the idea of Ron Grzywinski, the co-founder of ShoreBank, that if we as customers of banks just choose financial institutions that are run ethically and are socially responsible, and choose asset managers that invest ethically, and pretty much see our dollars as a constant vote for or against ethics, then things would change. But that requires us all to be responsible – not just banks. 

I’m not sure the UN would want to take that one on.