SUSTAINABLE FINANCE AND BANKING: A CHALLENGE FOR REGULATORS AND A RISK MANAGEMENT SYSTEM

Abstract

The key position of banks in the financial sector, as well as their indisputable role in financing economic development, have conditioned the need to consider their impact on the environment. The implementation of the concept of sustainability in banking has conditioned the transformation of banks in the direction of their greater corporate eco-efficiency and the development of banking products and services that contribute to sustainable development. Sustainable finance for banks is a source of new opportunities, but on the other hand, banks are more and more concerned about their exposure to environmental risk. Recognizing the impact of environmental risks on banks’ operations, central banks and supervisors are taking a number of initiatives to reduce the negative impact of these risks on banks’ operations, and, thus, financial stability. The paper aims to point out the challenges that sustainable banking has posed to regulators and the risk management system