Sustainable Finance, the Law and Stakeholders: Values-based Banks and Global Banking Regulation

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Global banking regulation is on the verge of a ground-breaking transformation from the mainstream dominant economic model to a people-oriented sustainable approach. This innovative global research, informed by transitional and regulatory theories, aims at maximising the opportunities to inform and underpin such a paradigm shift in the banking sector. It will do so by exploring the role and potential of 'values-based banks' - that is small and niche banks which adhere to Principles of Sustainable Banking (2011) and are values-driven rather than exclusively profit-driven - to inform the re-shaping of global banking regulation. In order to realise this ambition, it is proposed to co-create and conduct this timely and topical research over three years in partnership with both the Global Alliance for Banking on Values (GABV) which currently represents 40 small commercial banks, credit unions, microfinance banks globally (including the UK), and with the World Bank (WB), which made a formal offer to provide the necessary leverage for this research. The research is set within the ongoing debate over the role of the financial and banking sector in achieving sustainable development (SD). The concept of sustainable banking is complex as it relates to the goals of balancing the social, environmental and financial aspects of banking business and using banking services to achieve social and environmental long-term impacts. The current focus of the global banking regulation is on the largest and frequently described as the 'too big to fail' banks identified by the Financial Stability Board (FSB). Small banks are well positioned to have SD as the core of their practices but their potential to inform global banking regulation is unexplored. Following innovative sampling informed by transitional and regulatory theories, the research will draw from the experience of GABV niche banks.The study will be conducted over two Phases by taking a mixed methods approach: a desk based review and a triangulation of quantitative and qualitative data. Two placements will facilitate access and the adequate collection of data: a 6-month placement at GABV and a 3-month placement at the WB. The research will actively involve NGOs, which follow the current debates on SD banking regulation (eg. Friends of the Earth, Finance Watch).Phase 1 will identify values-based banks' innovative and niche sustainable development practices and assess how far these practices can and should inform global banking regulation via surveys and interviews. For example values-based banks' social engagement practices may constitute best SD practice but may be of little use for global banking regulation. Alternatively, these banks may have particularly strong environmental disclosure practices which could be included in global regulation. The research will identify the preferred regulatory strategies for embedding the innovative and niche SD strategies into global regulation via a focus group, which will meet several times.Phase 2 will assess and test Phase 1 proposals with the global banking regulators (such as FSB) and the largest global banks (such as Barclays Bank) via surveys, interviews and focus groups. Ultimately, it will identify those values-based banks' practices that can be taken up realistically by the global regulators. Phase 2 will also lead to establishing a Stakeholder Forum, whose mandate will be to promote Phase 2 findings and ensure they are on the global regulators' agenda. The research will lead to producing several high-quality outputs, including a planned monograph, four journal articles, two impact reports, and developing interdisciplinary links. It will benefit several stakeholders such as GABV, the World Bank, global regulators, NGOs, and large banks.