Book contents
- Making the Financial System Sustainable
- Making the Financial System Sustainable
- Copyright page
- Contents
- Figures
- Tables
- Boxes
- Contributors
- Foreword
- Preface
- Introduction
- 1 Capitalism Meets Multilateralism
- 2 Public Meets Private
- 3 Central Banking and Climate Change
- 4 Sustainable Finance and Prudential Regulation of Financial Institutions
- 5 Transparency and Accountability Standards for Sustainable and Responsible Investments
- 6 Environmental Risk Analysis by Financial Institutions
- 7 Sustainable Governance and Leadership
- 8 ESG Risks and Opportunities
- 9 Active and Responsible
- 10 Passive-Aggressive or Just Engaged
- 11 Financing a Just Transition
- 12 Sustainable Finance for Citizens
- 13 Individual Impact Investors
- 14 Strengthening Green Finance by Better Integrating the Social Dimensions in the European Union’s Sustainable Finance Laws
- Index
- References
4 - Sustainable Finance and Prudential Regulation of Financial Institutions
Published online by Cambridge University Press: 30 October 2020
Edited by
Book contents
- Making the Financial System Sustainable
- Making the Financial System Sustainable
- Copyright page
- Contents
- Figures
- Tables
- Boxes
- Contributors
- Foreword
- Preface
- Introduction
- 1 Capitalism Meets Multilateralism
- 2 Public Meets Private
- 3 Central Banking and Climate Change
- 4 Sustainable Finance and Prudential Regulation of Financial Institutions
- 5 Transparency and Accountability Standards for Sustainable and Responsible Investments
- 6 Environmental Risk Analysis by Financial Institutions
- 7 Sustainable Governance and Leadership
- 8 ESG Risks and Opportunities
- 9 Active and Responsible
- 10 Passive-Aggressive or Just Engaged
- 11 Financing a Just Transition
- 12 Sustainable Finance for Citizens
- 13 Individual Impact Investors
- 14 Strengthening Green Finance by Better Integrating the Social Dimensions in the European Union’s Sustainable Finance Laws
- Index
- References
Summary
Institutional investors channel savings to investments. The chapter looks at banks, insurers and pension funds, and their ability to foster sustainability. Their investment decisions have a crucial role in either making some activities possible or others not. Different institutional institutions, depending on their individual characteristics, operate under different sets of prudential regulation, tailored to their specifics. There is a topical debate on how prudential supervision is best used to foster sustainable investment. The alternative approaches are either a neutral risk-based approach, or one that either incentivises sustainable investments through lower capital charges or penalises ‘brown’ ones through higher charges. Different stakeholders have different thoughts on the best approach, with supervisors generally supporting an orthodox risk-based approach and the investors, while generally supporting the risk-based approach, having some reservations on the issue.The conclusion will be that the risk-based approach will be the sustainable financial approach. After all, rather just a climate catastrophe instead of a climate catastrophe connected to a financial catastrophe.
Keywords
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- Chapter
- Information
- Making the Financial System Sustainable , pp. 75 - 103Publisher: Cambridge University PressPrint publication year: 2020
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