Abstract
This article explores the role of multilateral development banks (MDBs) in originating norms of sustainable banking that have attracted and supported green private finance, a role not widely known in the management literature. Any prospect of achieving the United Nations (UN) Sustainable Development Goals by 2030 presupposes mobilizing the estimated US$23.3 trillion currently locked-up in risk-averse private savings to bridge the gap between developing countries’ demand for capital and the current global financial architecture’s capacity to supply it. The three biggest obstacles to sustainable banking identified by the authors are discussed: (1) The uncertain bankability of projects; (2) non-transparency in tracking sustainable capital flows; and (3) no universal mechanism capable of making matches between green investment supply and demand; and what MDBs have actually done to overcome these roadblocks, and might do in future, is also discussed. Seen through the lens of “applied constructivism”, MDBs are revealed to be norm entrepreneurs proactive since at least the 1970s in socially constructing most of the basic norms and practices of sustainable banking which the private sector relies on or is now striving to take up. MDBs are typically the first “port of call” for international governmental organizations (IGOs) and civil society organizations wishing to establish a sustainable financial framework for development; and are the likeliest political agents to pioneer sustainable banking in future. MDBs would do well to develop an awareness of the methods of Constructivism, which they have actually been unwittingly using, to empower themselves to meet the challenges of the 21st century.
Highlights
Sustainable development is a notion that has cut across international civil society, from international governmental organizations (IGOs), non-governmental organizations (NGOs), media and academia, even to the commercial banking sector via “sustainable banking”
multilateral development banks (MDBs) are increasingly working with national development banks (NDBs) that possess a hoard of unique local knowledge of great interest to sustainable banking, connections to local markets and actors [134], and which can supply long-term financing in local currency
MDBs have proven to be the key catalyst in the evolution of sustainable banking practices and norms
Summary
Sustainable development is a notion that has cut across international civil society, from international governmental organizations (IGOs), non-governmental organizations (NGOs), media and academia, even to the commercial banking sector via “sustainable banking”. As actual current investment is merely US$1.4 trillion, a massive gap of US$2.5 trillion per year subsists [2] To bridge this chasm, coordinated mobilization of private capital is necessary, according to a joint report by 7 multilateral development banks (MDBs) [3]. We contend that the multilateral development banks and the commercial banks need each other to reach truly sustainable finance for the SDGs; neither can go it alone. Of the two classes of partners, only they have the unregulated, international agency (or freedom of action) to innovate norms of sustainable finance. They are the best-positioned to act as norm entrepreneurs in the social construction of sustainable banking. The last, fifth section concludes with a brief discussion and remarks
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