The Commercial Banking Sector

The integration of sustainability into the banking sector has two main focuses:[ CITATION Mar01 \l
1033 ]

 The pursuit of environmental and social responsibility in a bank's operations through

environmental initiatives (such as recycling programs or improvements in energy efficiency) and
socially responsible initiatives (such as support for cultural events, improved human resource
practices and charitable donations);
 The integration of sustainability into a bank's core businesses through the integration of
environmental and social considerations into product design, mission policy and strategies.
Examples include the integration of environmental criteria into lending and investment strategy,
and the development of new products that provide environmental businesses with easier access
to capital.

The integration of sustainability into a bank's core businesses has the potential to influence business on
a larger scale. By integrating sustainability into a bank's business strategy and decision-making
processes, institutions can support environmentally or socially responsible projects, innovative
technologies and sustainable enterprises.

The interdependency between a bank's profitability and the environmental record of its clients has
influenced the business strategy of both banks and their corporate clients. This has happened in several
ways. In particular:[ CITATION Mar01 \l 1033 ]

 To decrease their exposure to environmental liability and to improve risk management, bankers
started to look more closely at the environmental performance of their clients. They developed
mechanisms to assess the environmental risk exposure of their customers, and to protect
themselves from potential losses.
 This growing concern about clients' environmental performance, manifested in lending and
investments decisions, began to act as an additional driver of sustainability in the private sector.
Companies were given one more reason to pursue environmentally and socially sound solutions.

A smaller number of leading banks have taken their activities further, and for instance have started to
take a wider view of environmental factors in credit assessment, including developing checklists and
other procedures.

Commercial banks have more influence on small and medium enterprises than larger companies
through their lending practices and providing information. Many banks nowadays finance only the
environmentally sustainable projects. These banks have developed environmental management system
which is an effective way forward for the sector.
The Investment Sector

Private capital is the major source of external financing for rapidly developing countries. It’s very
important that the private financing to become a source of sustainable development in the developing
countries. Investment sector have a large impact on big companies.

Many private investors have more interest in profits than sustainable development, but recently
pressure has been increasing on the investment sector to achieve sustainable development. Many large
financing companies are focusing on developing the concept of eco efficiency and encouraging its use
among the investors. There has been a growing interest from individual investors in environmentally
responsible investment growing interest from LQGLYLGXDOLQYHVWRUV in environmentally responsible
investment and this has led to the development of some progressive environmental investment funds.

A few environmental NGOs have also started to target fund managers and investment banks over their
investments and involvement with environmentally damaging companies. To date they have not had
major success, but have started to influence the sector.[ CITATION DEL97 \l 1033 ]

A few organisations among the investment sector have started to take environmental issues more
seriously and may be creating some peer pressure for change. While much scepticism exists and should
not be underestimated, there are signs that attitudes may be changing.[ CITATION DEL97 \l 1033 ]

A major concern for the investors is the relationship between economic performance and investment
performance. Investors mainly focus on short term profits and overlook the long term profit. Many
investors are unconvinced and do not believe that good environmental performance result in good
financial performance, so there is need to persuade these investors.

Insurance sector

The potential of insurance sector in achieving sustainable development lies in its ability to price various
types of environmental risk and to help pay for environmental damage. The insurance industry is the
only economic player that focuses on all types of risks. This means that it assumes a key "early warning"
function for society at large. Its ability to limit losses, prevent damage and diversify risks also plays an
important role in society: the insurance industry spreads risks over many shoulders, acts as a catalyst for
financing and investment, and shapes markets. In doing so, it promotes economic development and
ultimately contributes to sustainable development. What is more, insurance companies give private
households and the corporate sector alike a sense of security as far as their financing and lending plans
are concerned, and make sure that individual lifestyles are not suddenly shattered by the heavy burden
of loss events. In this sense, insurance companies compensate for any fluctuations that may arise,
helping to ensure stability among private households and for the economy as a whole.[ CITATION
DrE10 \l 1033 ]
Insurance companies also bear responsibility in their role as investors. Customer funds have to be
managed in such a way that the initial promise made to the customer can be kept, even after a period of
many years, in the event of a loss, or when a pension is paid out. The financial crisis is testimony to this:
insurance companies have to select cautious investment strategies and be more transparent when
explaining to their customers where and how their money will be invested.[ CITATION DrE10 \l 1033 ]

More and more people are beginning to realize that an insurance company's business model relies on
more than the knowledge and consolidation of risks. It also needs long-term financial planning and a
forward-looking, cross-generational vision.

Bibliography
Helten, D. E. (2010, March 17). Allianz sustainable development report. Retrieved February 20, 2011,
from Allianz:
https://www.allianz.com/en/responsibility/challenges/sustainability_in_finance/global_challeng
e/global_challenge.html

Jeucken, M. (2001). Sustainable Finance and Banking.

ltd, D. i. (1997). The role of financial institutions in achieving sustainable development.