Financial institutions are pivotal in addressing arguably
the biggest challenge the world faces today — sustainable
development. Several pioneering financial institutions,
some with the collaboration of non-governmental
organizations (NGOs), have developed key initiatives to act
as a road map toward ensuring intra- and intergenerational
equity. These initiatives are referred to as codes of conduct,
and take on the name “voluntary,” because organizations
are not mandated to adopt them. Nonetheless, these selfregulatory
codes sometimes act as “soft” laws that are
quasi-legal documents, but without any binding force
other than benefits for the signatory. Codes that fall within
the purview of this research include the United Nations
Environment Programme Financial Initiative (UNEP FI),
the Equator Principles (EP), the United Nations Principles
for Responsible Investment (UNPRI), the Global Alliance
on Banking Values (GABV) and the Impact Reporting and
Investment Standards (IRIS). Despite being formulated as
tools to combat sustainability challenges, research suggests
that adoption of these codes can be largely attributed to
financial risk management and enhancing reputation.
This paper discusses the strengths and weaknesses of
the financial sector voluntary sustainability codes of
conduct. It concludes that enforcement of the codes of
conduct is a major issue, that they mainly focus on the
business case of sustainability, rather than the impact on
sustainable development, and that the codes of conduct
are compromises that each financial institution can agree
to without changing their business to move in a more
sustainable direction.