CSR Programs of Financial Institutions: Development-Oriented Issues or Just Greenwashing?

Introduction

Financial Transnational Corporations (FTNCs) are the giants of the world economy; despite not having a productive activity, they have a major impact on the real life because all companies and consumers need different financial products and services. FTNCs ensure the financing of economic agents not only from the countries of origin but also from the host countries, thereby influencing transnational transactions at the global level. The business method of FTNCs have a worldwide impact, from Small and Medium Enterprises (SMEs) to financial consumers and investors. FTNCs have evolved from the sole goal of maximizing profit at any cost for shareholders’ interest to satisfying various stakeholders. The effects of the financial crisis of 2008 felt by people across the globe, generated a rather hostile attitude towards FTNCs.

The uncontrolled feeding of the financial innovation process by banking institutions and the poor disposal of banking products by rating agencies contributed to the financial crisis in 2008. The devastating impact of toxic assets on the real economy was further highlighted during the global crisis. For these reasons, we are currently witnessing the metamorphosis of the international financial system, under the sign of sustainable development and corporate social responsibility (CSR). It has been noted that financial institutions have different behavior in host and home countries. The application of the double standard suggests a chameleon behavior that on the one hand promote social responsibility but, on the other hand, generate negative externalities especially in developing countries characterized by abusive behavior towards consumers coupled with poor financial education. Seeking to exploit the low level of financial education, banks with foreign capital practice use abusive contractual clauses and deceptive promotional techniques. Therefore, the presentation by financial institutions of detailed information on their websites or even the publication of sustainability reports is considered by some specialists as a greenwashing technique that tries to beautify the real situation and create a very good image among stakeholders.

In terms of CSR, banks are very involved and run various programs that focus initiatives such as the development of local communities and improvement of financial education. Such programs ensure an improvement of the image among consumers and enhances public opinion (Perez & del Bosque, 2009; Pérez & del Bosque, 2015; Ruiz, 2018; Palazzo et al., 2020; Pérez et al., 2020; Siano et al., 2020; Stancu et al. 2020). To shed more light on the discussions surrounding the motives of FTNCs, this work investigates the genuineness or greenwashing of CSR activities of the FTNCs, and how they promote the principles of sustainable development by adopting green standards such as the Equator principles (EPs).

In specific terms, the study sets out to discuss CSR activities of the FTNCs, and how they promote the principles of sustainable development by adopting green standards such as the Equator principles (EPs). EPs represents a CSR framework that is voluntary and serves as a basis of determining, assessing and managing environmental and social projects¹.

CSR is also very important in financial institutions mainly because of the role in capital allocation and infrastructural development (Osellame, 2013). For example, Canadian Bankers Association are also committed to sustainability initiatives. To demonstrate their commitment, the association have adopted sustainable banking through some of their operations in areas such as purchasing green power and reducing the amount of paper used². Furthermore, the Bank Act (459.3) requires Canadian banks with more than one billion dollars to publish a statement describing the contribution to the Canadian economy and society (The Bank Act, 1991)³. This requirement further emphasizes the importance of sustainability initiatives within the banking industry.