Why Self-Commitment Is Not Enough: On a Regulated Minimum Standard for Ecologically and Socially Responsible Financial Products and Services

Abstract

A broad variety of financial products and services is advertised as being ecologically and socially responsible. The market for these products and services, however, is characterized by a number of shortcomings. First, financial service providers largely make their own very general definitions of what is ecologically and socially responsible. Therefore, it is largely impossible to fully understand these products and services and to compare among them and with “traditional” products and services. Second, there is no level playing field for providers of responsible financial products and services, which hampers competition in the market. To tackle these problems, we suggest a regulated minimum standard for ecologically and socially responsible financial products and services which addresses clear and unambiguous criteria and how information about their fulfillment should be presented. This standard would allow consumers to understand and compare financial products and services, and it would provide a level playing field for intermediaries and strengthen competition.