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© Chhotu Khan

Where your money goes?

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This story is about banks.

But before you hit the snooze button… it also involves you.

At least I’m assuming you have a bank account and some cash sitting in it?

Did you ever wonder where your money goes?

Perhaps not, but you might be surprised to learn that your hard-earned Panda paise could be funding a highway, a railway or a coal mine. In fact the odds are pretty high…. the basic way banks generate revenue is to take your cash and lend it out to someone else at a higher rate than what they’re paying you. Who they lend it to, how it’s lent and what it’s used for – is pretty much beyond your control, and largely dependent on their commercial interests and internal processes.

There are, of course, many banks all looking to finance the same companies and projects – there is a constant competition between financiers to find new, lucrative opportunities.

It means that banks are all-pervasive – reaching across the entire economy – lending and investing not just to, say, a coal mine operator, but the company providing the heavy equipment, the transportation company, the people buying the coal and the people burning it to power our homes. It gives them a powerful position in our world. All companies need capital to survive.

WWF sees the finance sector as a strategic opportunity to influence the way corporations behave. If we can transform the conditions under which banks lend your money, then the way in which companies conduct their operations also changes, with benefits to the environment and society at large.

To give you an example a bank might ask a palm oil grower to achieve RSPO certification before providing a loan. Or seek a full social and environmental management and remediation plan from a coal miner as condition of finance.

If it sounds a little far-fetched you’ll be pleased to know a lot of banks already do this quite well – particularly those with a global reach and brand exposure to campaigns by international NGOs or demands from concerned investors. The challenge is to convince more banks and regulators, particularly in emerging markets, to follow suit.

This week in Singapore I attended the first Environmental, Social and Governance (ESG) risk workshop for finance institutions hosted by WWF and the Singapore Stock Exchange. The aim? To raise the awareness of key people within the Singapore banking sector of the need to consider the environmental and social impacts of the way they lend money, and to provide them with a ready-guide to implement the necessary internal changes to begin the journey towards more sustainable finance standards.

The workshop is one of many to be held around the region, including in India, and part of a broader effort to not only engage banks on this important subject but make the case to central banks. There are signs of change – green credit guidelines in China and similar activity in Malaysia and Indonesia. Let’s hope WWF can move India in the same way.



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