ABSTRACT
Environmental protection and sustainability have a complex relationship with finances and financial institutions. Financial institutions such as banks, pension funds and insurance companies, are increasingly seen as of vital importance for reaching environmental and sustainability goals. Initially, and at least till the early 1990s, the availability of finances and the functioning of financial institutions were considered to contribute significantly to unsustainable practices. Through their investment and loan practices, banks and other financial institutions were seen as major drivers behind economic growth and as such major contributors to natural resource depletion and environmental pollution. From the 1990s onwards, the sustainability perspective of financial institutions and the availability of finance has diversified. On the waves of ecological modernization (Spaargaren and Mol 1992) financial institutions were also considered as potentially major institutions, actors and instruments in greening investments, industrial development, and infrastructures. And lifting restrictions on finance was no longer one-to-one related to increasing pollution and resource extraction, but also to greening technological development and capitalization of green transitions (e.g. Scholtens 2006; Perez 2008; Yuxiang and Chen 2011, 95–97; UNEP 2014). Also, there was more and more recognition that public finance alone would never be able to free the finances needed to turn economies and societies green, as major investments will be needed in industrial transformations, new infrastructure, retro-fitting existing buildings, zero-carbon development and the like (Shen et al. 2013). This more positive role of financial institutions for the sustainability agenda started to gain prominence in the scholarly literature in the early 1990s, first especially with respect to international institutions such as the World Bank and its International Financial Corporation, other regional development banks, and the International Monetary Fund (IMF) (Perez 2008). These financial institutions decided – under considerable pressure from NGOs and some states – to integrate ecological considerations and later even conditionality into mainstream lending policies and practices. Following these development banks and international financial institutions, private banks also, starting with the larger ones from OECD countries with international operations, began to subject lending to some form of voluntary environmental regulation. The UNEP Finance Initiative, established in the 1990s, 209was the first to try to provide a global normative framework for the incorporation of environmental considerations into the business practices of public and private financial institutions. During all these initiatives and related debates it became clear that there were still many teething troubles and conflicting goals, which come along with sustainability roles for finance. The ambivalences of finance, financial instruments and financial institutions for the sustainability agenda made the design and implementation of the former three of key importance, and thus subject of research and politics.
