We are at a crossroads in relation to global sustainability. Drastic action is required to address the continued transgression of Earth’s planetary boundaries and the increasing inequality within and beyond countries. Banks and other financial institutions are at the centre of this controversy. Although many legislative and regulatory initiatives at national and supranational levels have been launched to tackle the financing of unsustainable business, such funding remains commonplace and financial institutions continue to support business activity, which is highly damaging to both the environment and the social foundation of humanity. Market-led reforms to the financing chain have been largely ineffective in stemming the tide of financing for unsustainable ventures. This has also resulted in widespread greenwashing, as well as the systematic under-reporting of the footprint of the financial system in contributing to this damage. Such factors undermine the democratic process and delegitimise claims by the industry that market-led change is working.
Yet, we must also recognise that the financial industry and its constituents have the potential to be drives of sustainable change at the global level. The heightened appreciation by regulators of the dangers of unsustainability provides significant impetus for new approaches to regulating the financial system. In tandem, the governance and decision-making, which takes place within financial institutions, exert enormous influence on economic and industrial direction. This power, in combination with new financial technologies and increasing numbers of money managers who treat sustainability seriously, provide the basis for a platform to reconfigure European investment patterns to promote a more sustainable, just and inclusive future.
On this basis, the Research Group has identified the following areas of thematic priority for research on law and sustainable banking, broadly conceived:
- The role of central banks – these institutions sit at the apex of the financial system and their rules and policies structure the behaviour of financial market participants;
- Micro- and macro-prudential regulation – the laws which govern prudential requirements for financial institutions are important levers with which to direct financial flows;
- Fiscal rules – such rules play a decisive role in determining the financial firepower available to sovereign governments in tackling unsustainable business practices;
- Reforming the market structure of finance – large financial conglomerate institutions occupy a central role in the financial system and exert outsized influence on industrial policy;
- Financial inclusion – many global citizens remain unbanked or without easy access to financial services, undermining their ability to meaningfully participate in economic and social life. Properly-designed laws on access to finance have the capacity to correct these injustices;
- Public investment banks – the role of public investment institutions and authorities is key to financing the green transformation; and
- Transdisciplinary collaboration – we aim to work together with financial actors to co-produce knowledge on how sustainability can be better integrated into their activities. An example of this is a transdisciplinary project together with the Norwegian regional bank, Sparebank 1 Østlandet. The collaboration is led by Professor Beate Sjåfjell and postdoctoral scholar, Hanna Ahlström.