Sustainable Finance - For real or just another CSR strategy?

Isn’t it great? After having supermarkets announcing that they are going green (e.g., REWE in Germany), offering a range of biological and fair-trade products, and fashion companies promoting their conscious collections; now, we even have the possibility to invest our money in sustainable investment products.

Triodos – the worlds’ leading sustainable bank

Recently, growing attention has been devoted to banks that offer sustainable financial services. One of the big players in this business is Triodos. The bank is calling itself one of “the world’s leading sustainable banks” and their mission is to make money by investing in positive social, environmental and cultural change. And, indeed, the strategy seems to work. Triodos has lifted its profits up by more than a third and reported 15% more customers in its annual financial statement of 2015.

Giving the financial locusts the cold shoulder

People seem to like the idea of giving their money to a “reasonable” and “responsible” bank, instead of feeding the greedy, reckless, and profit-seeking institutions that have suffered from a tarnished image ever since the global financial crisis 2007-2009. Certainly, the fraudulent behavior of the banks have contributed to clients becoming suspicious and thinking more critically about banks. But can we explain this change of awareness in deciding where to invest one’s personal finances also by other large-scale shifts?

Going green – from head to toe

We are witnessing large social changes these days – be it related to the way we live, consume, travel, or work. Particularly the younger generations from developed countries seem to have become more and more aware of protecting our environment and leaving a smaller and cleaner footprint on earth. We see this implemented by increasing consumption of biological products (Lewis, 2016), using renewable energies, or the rising success of the sharing economy. It speaks for itself, therefore, that people also start to think about where and how to invest their money to get it in line with their “green” way of life.

Is it all that “grass-green” as it seems?

So, are we now at the crossroads of entering a new financial system, a “green” way of dealing with our finances? Banks, such as Triodos, communicate on their website that they want to provide financial services that focus on the sustainability of our world by acting in a transparent, excellent, and entrepreneurial way. And even other institutes, such as the German bank GLS or conventional banks such as ING, are jumping on this trend and providing green investment products in their portfolio.

But can we really trust these promises and the seemingly “green” investment models?

When taking a look at Triodos’ website and inspecting the investment products, the aim of being a bank that stands for sustainable finances becomes questionable to a certain extent. Although Triodos explains their investments very well and in a transparent way on their website, in some of the funds you also come across dodgy company names such as H&M, Chipotle Mexican Grill, Henkel or Procter & Gamble. Explanations of why these companies are included range from long-term environment goals that the companies seek to achieve, the aim of bringing about long-term improvement, or the ambition to meet certain environmental standards in the future. These aspirations are laudable, but in my opinion a fast-food restaurant selling unhealthy food, one of the biggest retailers in the world letting their products still being produced under dangerous labor conditions, and producers of chemical laundry, home, and care products, cannot be considered sustainable.

Goodwill or deception?

Of course, it is difficult to find businesses that are truly green and fulfill desirable

characteristics to be found entirely sustainable. But where can we draw the line? What can

be considered sustainable or green, and what not?

Hence, the important question, after all, is whether the goal of sustainable finance is actually realizable or whether “sustainable finance” is just another fraud of the financial industry to make more money?

An emerging field of research

I think this question opens an intriguing field of research in financial communication and related fields, such as corporate social responsibility (CSR). Future research could investigate whether sustainable finance actually has potential, or whether this trend can be considered as just another “outgrowth” of the financial market to deceive people?

Note:

Do you find the topic of "sustainable finance" also interesting? If you would like to collaborate with me in doing research in this field, please feel free to contact me: n.strauss@uva.nl

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