The role of commercial banks in sustainability

Franklin Owusu-Sekyere

Sustainability is being pursued in many ways, driven by the global commitment to meet present needs without compromising the ability of future generations to meet theirs. ¹ The financial system, particularly commercial banks, plays a significant role in advancing sustainable development. This article explains what sustainability in banking means and how banks support sustainable development by financing green projects, promoting environmental, social and governance (ESG) compliance, encouraging corporate social responsibility (CSR), and offering products linked to sustainability goals. Although sustainable banking faces challenges such as the lack of standardised ESG metrics, greenwashing, high implementation costs, and the trade-off between sustainability and profitability, it offers significant benefits. These include reduced financial risk, stronger reputation and customer loyalty, improved long-term profitability, better regulatory compliance, and positive environmental impact. The article recommends that regulators proactively standardise sustainability metrics for banks and non-bank businesses to improve comparability and meaningful analysis. It also recommends providing incentives to banks that adopt sustainability measures in their operations.