How are values-based banks contributing to the sustainable transformation of their markets?
The Global Alliance for Banking on Values has prepared case studies of three of our members redefining the sustainability frontier in their markets. More specifically, the objective is to pinpoint pathways for the transformation of banking models towards social inclusion by investigating the practices of the GABV members: MagNet Bank in Hungary, Banca Etica in Italy and GLS Bank in Germany.
The VALoRE Project
These three case studies are part of the VALoRE (Values Regulation in Europe) programme. Funded by the Open Society Foundations, the overall objective of VALoRE is to strengthen the capacity of the financial sector in Europe to deliver a just transition to a low carbon, socially inclusive future. More specifically, VALoRE aims to influence the development of the European Union Taxonomy by clarifying how ‘social impact’—in terms of inequality, job security, and equitable access to safe food, housing, energy, and health—can be defined and integrated in the practices of banks.
The taxonomy regulation includes a clear requirement to respect Human Rights following the OECD guidelines. However, there is no agreed upon definition of ‘social impact’ beyond human rights. Inequality, job security, and equitable access to safe food, housing, energy, and health are yet to be included in the taxonomy of sustainable activities.
The principle-based approach to banking of the GABV members shows what the role of financial institutions can be in the move towards a low carbon, socially inclusive future. These case studies of the activities and influence of three member banks in Europe illustrate the Principles of Values-based Banking that inspire the Banking on Values movement.
Learnings on social impact from frontrunners
MagNet Bank Case Study
GLS Bank Case Study
This case study shows how GLS Bank is using a social-ecological approach. Through this holistic lens, the bank integrates both social and environmental visions of the future into decisions and activities, along with the requirement for societies to respect planetary ceilings and social floors.
Banca Etica Case Study
This report shows how Banca Etica delivers positive social impact alongside real economic value. It does so by including social criteria in the credit process as a foundation for rethinking risk, supported by a broadening engagement with clients and other stakeholders.
Sustainable Market Transformation Theory
The methodology used for these case studies is based on the analysis of corporate reports and interviews with several executives of the bank. The theory of Sustainable Market Transformation is translated into eight steps for developing an effective strategy to stimulate systemic change in existing markets. The last step is not applicable in a case study setup, so this questionnaire is organised around seven steps:
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Step 1: Define the market
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Step 2: Focus on the main sustainability challenges in this market
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Step 3: Back-cast the envisioned future
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Step 4: Analyse the current system loops
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Step 5: Map the maturity of the initiatives so far
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Step 6: Use the stakeholder matrix to decide who needs to do what
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Step 7: Develop or refine an actionable strategy
Step 1: Define the market
Tackling complex problems can be overwhelming. The first key step is to define the market where the sustainability challenges occur.
Step 2: Focus on the main sustainability challenges in this market
The second step is to focus on the main sustainability challenges in this market. A good way how to do this is by executing a sustainability materiality assessment. This is an assessment to prioritise the main sustainability challenges in a specific situation relevant to the organisation.
Step 3: Back-cast the future you envision
The next step is to create a vision of what the market will look like if the solutions for this sustainability challenge are fully institutionalised. So, this step is not about the solutions themselves.
Step 4: Analyse the current System loops
There are four generic system loops according to the theory on sustainable market transformation. When these four loops coincide, they create unsustainable outcomes every time. Each loop asks critical system questions that aim to explain the collective behaviour of actors in the system.
Step 5: Map the maturity of the initiatives so far
In this step, the objective is to create an overview of the relevant initiatives and how they are changing the underlying system loops. The phases are:
Phase 1: Inception – Actionable alternatives through projects and pioneering (pilots, charity, subsidy programs) next to the core business.
Phase 2: Competitive Advantage – Proven business models through innovation and competition (labels, rankings, branded programs) linked to or integrated in the competitive advantage of the business; value chain collaboration, selected group of multi-stakeholders in the program.
Phase 3: Pre-competitive collaboration – Critical mass through coalitions and platforms. Multi-stakeholder collaboration, pre-competitive agenda, structural collaboration with governments and civil society; Policy goals and indicators; Exploration of a viable business case for all stakeholders; Scaling-up solutions to the entire market.
Phase 4: Institutionalisation – Level playing field through legislation and coercive self-regulation, and/or new policies, legislation and/or financial (e.g. tax) incentives, ‘license to operate’; Compliance with law and enforcement.
Step 6: Use the stakeholder matrix – Who needs to do what
The stakeholder matrix helps to determine what roles are most effective for each of the market actors in the current phase of the market.:
Step 7: Develop and refine an actionable strategy
Knowing more about the momentum in the market helps to develop a strategy for the near future. This strategy should answer the magic question: Who should do What, and When should they do it?
Meet the authors
Adriana Kocornik-Mina
Metrics and Research Sr Manager
Global Alliance for Banking on Values
adriana.kocornik@gabv.org
André Nijhof
Professor Sustainable Business and Stewardship
Nyenrode Business Universiteit
a.nijhof@nyenrode.nl
Funded by
The reports are part of the VALoRE (Values Regulation in Europe) Project, that aims to strengthen the capacity of the financial sector in Europe to deliver a just transition to a low carbon, socially inclusive future. This just transition is as much a right of every European Union citizen as a key to peaceful societies. The project has been funded by the Open Society Foundations as part of the Open Society Initiative For Europe research programme (OSIFE).
LEARN MORE
Research: The Social Impact Model of Values Based-Banks
How values-based banks create social impact has been the focus of an exploratory study by researchers of the Global Alliance for Banking on Values and the UPF Barcelona School of Management, published in the academic journal Sustainability.
The findings are a guide to social impact from frontrunners in values-based banking, and inform the EU agenda on Sustainable Finance.
