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According to IFC’s 2007 report Banking on Sustainability, which included a survey of 120 financial institutions in 43 emerging markets, the integration of sustainability into management systems and practices brings tangible benefits, including new lines of business, new clients, greater access to financing, greater shareholder value, and improved reputation and goodwill. Seventy-four percent of the commercial banks in the survey reported a reduction in risk as a result of considering environmental and social issues. Another 48 percent noted improved access to international capital, 39 percent benefited from improved brand value and reputation, 35 percent developed new business, and 26 percent benefited from improved community relations.

Key Sustainability Issues According to Banks
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Growing demand for financing creates an opportunity for financial institutions to expand product offerings to include sustainable finance as well as mitigate environmental and social risks of their portfolio. Financial institutions are uniquely positioned to focus clients on sustainable energy opportunities and catalyze investment decisions.

The business case for environmental and social risk management and sustainable finance for financial institutions is clear:

  • Expanded market share through new business lines:
    • Innovative product/first mover advantage (greater margins, less competition)
    • Sell on value to customer, not pricing
    • Monetize existing client base, attract quality new clients
    • New marketing channels through vendor partnerships
  • Reduced risk profile of portfolio:
    • Lower credit risk
    • Mitigation of environmental risks
    • Lower liability risk
    • Client cost savings from efficiency gains (such as energy) as part of cash-flow
  • Reputation:
    • Reduce reputational risks
    • Positive image and market differentiation
    • Enhanced brand value
  • Improved access to international financing:
    • International financial organizations increasingly provide financial resources to financial institutions for targeted lending/investing in energy efficiency and renewable energy projects

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