Sustainability Issues for Financial Industries

Sustainability Issues for Financial Industries

Sustainability has business implications for most of the companies' especially financial industry sector. Due to the implication of providing sustainability reports to the stakeholders' financial industries are facing lots of issues some of which are discussed below.

Taking care of sustainability has become a legal obligation for the companies from many aspects. If the company is not able to take care of the sustainability then it would be in breach of obligation due to which it may have to pay penalties or fines in relation to it or it may become reputational risk that later changes to financial risk. . As an example of this, the continuity of a client can become threat for the bank due to changing government policy or the shifting preferences of consumers, either of which can result from attempts to achieve sustainability. Guarantee too can decline in value more rapidly than if there were no environmental risks that can be happened in the event of serious soil pollution. Even banks can sometimes be held directly accountable for the environmental damages caused by the activities of its client. Reputational risks can also arise by investing in activities which are sufficiently disapproved of by society.

In order to make sustainability report financial institutions have to hire professionals to evaluate the extent to which the company is following rules of sustainability. For example, to measure the amount of Co2 and its effect Furthermore reporting requirements need to hire further chartered accountants by the company which result in increase in cost of the company. The detail analysis of the environmental sustainability makes it difficult for the user of the financial statements to make decision as it completely confuse the users.

It may be that financial institution like banks are unable to make repayments due to environmental and social costs.