The European Commission has developed an action plan which includes an EU classification of investments according to their level of sustainability (EU Taxonomy). 

The EU Taxonomy is a tool to help investors, companies, and other stakeholders to navigate the transition to a just, low-carbon, resilient and resource-efficient economy. While based in Europe, much of the international banking system is looking to see how this work develops and whether it can be inspiration for other regions.   

The GABV monitors the development of the European Taxonomy for Sustainable Finance, including the report on Social Taxonomy, and contributes to raise the bar of how banks can create social and environmental impact through best practices among its members. GABV banks apply tried and tested solutions to social and environmental problems. Their approach is ambitious, as well as practical and realistic, and therefore can be implemented by any regulated bank.

Making this model a reality requires regulators and policymakers to tackle obstacles to scaling up this model such as acknowledging the low risk profile of social impact portfolios in banking rules, by limiting the finance of harm, and helping to empower citizens to invest in positive impact.

For years, values-based banks have delivered positive social and environmental impacts for clients and communities. They have done so while generating a fair profit. Making a positive social impact is what they do. But how do they do it? 

This was the focus of an exploratory study published in the academic journal Sustainability, which outlines a model for advancing social impacts in banking. The findings have practical implications for all types of financial institutions willing to improve the way in which they address social challenges and ultimately create a more resilient and transformative financial system. 

The new study identifies a systematic approach derived from the best practices of 30 financial institutions – all members of the GABV and frontrunners in their industry – which shows how practitioners, including bank managers, investors and public authorities, can design and embed effective social impact practices across their entire organisation. 

This five-stage ’social impact virtuous circular model’ recognises that efforts toward societal transformation should be continuous, holistic and comprehensive. It posits that an institution must DEFINE social impact objectives, DESIGN a comprehensive approach to achieve that impact, IMPLEMENT the design in practice, and MONITOR the result in order to evaluate the initiative’s success, ultimately allowing for the possibility of SCALING UP these efforts in the future. 

Link to study

As a movement of values-based banks, the most effective means to deliver finance that contributes to a low-carbon, socially inclusive future is to address the framing conditions under which banks operate, including their purpose. Through the sharing of robust best practices on how to deliver values-based banking, we intend to  influence regulatory efforts of actors in the European Union and key EU countries specifically on integrating social factors beyond ESG (Environmental, Social and Governance) risks. 

A unique systematic approach for empowering financial institutions to play a major role in addressing global social, economic and environmental challenges can be applied by banks across the globe. By aligning with the best practices of the frontrunners in values-based banking, banks can provide resources – jobs, health, education, basic infrastructure, housing, food and safety – through products and services, and have a direct impact on the wellbeing of communities.