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Sustainable Banking: The Role of Multilateral Development Banks as Norm Entrepreneurs

Author

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  • Alvaro Mendez

    (ESIC Business & Marketing School, 28224 Madrid, Spain
    Global South Unit at LSE IDEAS & Department of International Relations, London School of Economics and Political Science, London, WC2A 2AE, UK)

  • David Patrick Houghton

    (National Security Affairs, U.S. Naval War College, Newport, RI 02481-1207, USA)

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.

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  • Alvaro Mendez & David Patrick Houghton, 2020. "Sustainable Banking: The Role of Multilateral Development Banks as Norm Entrepreneurs," Sustainability, MDPI, vol. 12(3), pages 1-21, January.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:3:p:972-:d:314134
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    Cited by:

    1. Jeong Won Kim & Jae-Seung Lee, 2021. "Greening Energy Finance of Multilateral Development Banks: Review of the World Bank’s Energy Project Investment (1985–2019)," Energies, MDPI, vol. 14(9), pages 1-23, May.
    2. Kohnert, Dirk, 2023. "Moral Money in Sub-Saharan Africa? On ensuring ethics to drive sustainable investment," MPRA Paper 117779, University Library of Munich, Germany.
    3. Avellán, Leopoldo & Galindo, Arturo J. & Lotti, Giulia & Rodríguez, Juan Pablo, 2024. "Bridging the gap: Mobilization of multilateral Development Banks in Infrastructure," World Development, Elsevier, vol. 176(C).
    4. Adrian Robert Bazbauers & Nadeen Madkour, 2024. "Gender and the Multilateral Development Banks: From WID to GAD to Retroliberal WID," Progress in Development Studies, , vol. 24(2), pages 165-184, April.
    5. Victoria Kuzenkova, 2021. "Effective Development Institutions," Public administration issues, Higher School of Economics, issue 5, pages 161-175.
    6. Alvaro Mendez, 2024. "Latin American agency: The New Development Bank, Uruguay's accession and Brazilian influence," Global Policy, London School of Economics and Political Science, vol. 15(2), pages 405-413, May.
    7. Markus Riegler, 2023. "Towards a definition of sustainable banking - a consolidated approach in the context of guidelines and strategies," International Journal of Corporate Social Responsibility, Springer, vol. 8(1), pages 1-26, December.
    8. Kohnert, Dirk, 2023. "La monnaie morale en Afrique subsaharienne ? Garantir l'éthique pour favoriser l'investissement durable [Moral Money in Sub-Saharan Africa? On ensuring ethics to drive sustainable investment]," MPRA Paper 117780, University Library of Munich, Germany.
    9. Adrian Robert Bazbauers, 2022. "Translating climate strategies into action: An analysis of the sustainable, green, and resilient city action plans of the multilateral development banks," Development Policy Review, Overseas Development Institute, vol. 40(2), March.
    10. Peterson K. Ozili, 2024. "Does banking sector support for achieving the sustainable development goals affect bank loan loss provisions? International evidence," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-39, April.
    11. Fatih Kayhan & Onur Özdemir, 2022. "The Lending Behavior of Investment and Development Banks in Turkiye: Evidence from Quantile Regression Approach," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-1), pages 239-267, June.

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    More about this item

    Keywords

    sustainable banking; multilateral development banks (MDBs); norm entrepreneurs; constructivism; sustainable development goals (SDGs); international development; commercial banks;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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