hi all this learning about sustainable financing got me thinking how did it all begin banks and financing the way we understand it now started in italy in the 15th century these italian banks acted regionally and had strong ties to the catholic church this meant that these banks were heavily influenced by religious ethics and morals for example these banks had to set a cap on interest rates follow strict ethical guidelines who are banned from lending money for luxury expenditures and even require the borrower to act socially responsible with their loan so what we today differentiate as
traditional and sustainable financing have the same origin point or really i would have never guessed that but hang on if that's the case then when do profit-driven and sustainable financing start diverging this happened between the 16th and the 17th century as regional banks became bigger they started adopting new financial practices they started promoting industrial growth by providing commercial businesses with cheaper debts this new technique accelerated economic growth and its success spread rapidly across europe by the industrial revolution in the 18th century these once regional banks started moving away from local financing to a more national
and international financing system this led to a gap in regional investment credit unions and cooperative banks arose in the second half of the 18th century to fill this gap their main clientele was the new middle and lower income classes that were arising from the industrial revolution credit unions and cooperative banks invested in supporting local business initiatives managed community relations and adopted socially responsible investments so basically traditional financing embraced international trade and wanted to maximize profits and became today's multinational banks whereas the credit unions and cooperative banks wanted to support local development through sustainable financing in
the form of socially responsible investments all of this makes sense but i just have one final question if multinational banks wanted to largely focus on trade and profits how come nowadays these banks have started to incorporate sustainable financing that is an excellent question but prepare yourself for a long answer after enjoying a period of unchallenged success in the 19th and the 20th century the honeymoon period for multinational banks ended in the 1960s people started criticizing these multinational banks for investing in companies that supported the vietnam war the south african apartheid regime and the destruction of
the environment in the 1980s we finally see multinational banks dip their toes in sustainable financing they did not do this voluntarily they did so because of regulations introduced in europe which required the financial sector to make sure the investments did not cause soil water or air pollution this meant that the financial sector needed to do environmental risk screening of their clients before investing in them this need for sustainable financing among mainstream multinational banks got further cemented with the un's bruntland report on sustainable development in 1987. it led to the creation of the united nations environmental
program financial initiative in 1992. the un epfi wanted to develop and promote linkages between sustainability and financial performance their biggest contribution was the freshfield brackaus during a report of 2005. it provided a legal framework for integrating environmental social and governance issues into institutional investments what followed soon after was sustainability becoming a business case in the financial sector this came in the form of various frameworks and initiatives that's pretty cool the journey of sustainable financing has ebbed and flowed through the course of history to begin with traditional and sustainable financing were one of the same they
were heavily influenced by religious ethics and morals fast forward to the industrial revolution and we see the traditional financing sector embrace international trade and become profit driven while on the sidelines the credit unions and cooperative banks supported sustainable financing in the form of socially responsible investments finally after years of political social and environmental unrest around the world in the 20th and 21st century the traditional financing sector started adopting sustainable financing as for the future of sustainable financing i guess that remains to be seen thanks for watching hope you enjoyed our video if you did leave
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