January 09, 2002
Book Review: Sustainable Finance and Banking
by William Baue
New book methodically argues that finance and banking have a significant role to play in achieving
Sustainable Finance and Banking: The Financial Sector and the Future of the Planet, by
Marcel Jeucken, works almost as three different books bound in one cover. Divided into Parts I,
II, and III, the sections build upon one another to provide a convincing argument for involving
financial institutions in plans for sustainable development.
Part I functions as a
textbook, outlining basic economic and environmental principles. Part II reads more like a
dissertation, analyzing how economics and environmentalism intersect in the practice of sustainable
finance. And Part III sounds like a manifesto, advancing a convincing argument for preventing
environmental apocalypse through sustainable business practices. This last section makes the book
required reading for anyone concerned about sustainability, and is applicable to mainstream and
professional audiences alike.
"Although the process of writing this book started as a
translation of a Dutch book called Duurzaam Bankieren (Sustainable Banking, Jeucken,
1998), the process of rewriting turned out to be so inspiring that in fact more of a new book has
evolved," states Mr. Jeucken.
Mr. Jeucken is a senior economist at the Rabobank Group in
The Netherlands and a doctoral candidate in sustainability and banking at Erasmus University.
While updating the material, he excised sections that focused narrowly on the Netherlands and
expanded the book's scope to encompass a global perspective.
"[C]are for the environment
and the concomitant need to build a sustainable society is not a fad but an irreversible
necessity," writes Mr. Jeucken. After establishing the extent of the environmental crisis and the
development of sustainable business as a response, Mr. Jeucken spends the remainder of Part I
explaining how banks mediate between business and the environment. "The role of banks in achieving
sustainable development is significant considering the intermediary role that they play in
society," he states.
The book proposes a developmental model of banking that echoes Jean
Piaget's developmental psychology at times. Mr. Jeucken posits four stages, or "phases" as he
calls them, in a kind of banking maturation process: defensive banking, preventive banking,
offensive banking, and, finally, sustainable banking. However, Mr. Jeucken emphasizes that these
phases may not apply to all situations. Most importantly, he does not want to posit a static
concept, but rather a dynamic one. "Our understanding of sustainability will undergo continual
enhancement," he writes.
Later, in Chapter 9 of Part III, he supports this developmental
paradigm by analyzing the degree of sustainability practiced at 34 international banks. He reports
a tentative correlation that banks in the sustainable phase tend to be more efficient, more global,
and larger in terms of assets. Defensive banks exhibit selfish, child-like characteristics while
sustainable banks exhibit more wisdom and foresight, according to this model.
Part II may
prove the most valuable to the financial and sustainability communities, but its technical depth
may intimidate more casual readers. Mr. Jeucken breaks up the material by including graphs,
tables, and case studies. For example, he quotes the Environmental Policy Statements from ten
banks, allowing readers to compare the relative opacity or transparency of their language. These
charts and examples illustrate his points effectively, helping lay readers to understand the more
arcane aspects of his argument.
The heavy language of Part II continues into the first
chapter of Part III, which is a case study of 34 international banks. However, Chapters 10 and 11
practically soar off the page, as Mr. Jeucken reveals the philosophical and spiritual perspectives
buried beneath the technical jargon. He establishes Kuhn's famous notion of paradigm shifts, then
encapsulates the entire historical development of Western philosophic and economic thought.
Alongside his precise descriptions, vivid examples abound.
Mr. Jeucken includes a line
graph charting population growth, affluence, and use of natural resources. The line is almost flat
throughout human history until the Twentieth Century, when it begins to rise almost vertically. He
then shows graphically how different courses of action into the future are unsustainable or
Most persuasively, Mr. Jeucken retells a parable for the world environmental
dilemma: if the amount of water lilies in a pond doubles daily, filling the pond in 30 days, when
will the pond be half full? Mr. Jeucken does not focus on day 29 as the correct response, but
rather focuses on finding solutions to prevent day 30 from arriving. In this way, he transforms
what could be an alarmist text into an optimistic one.
Sustainable Finance and
Banking: The Financial Sector and the Future of the Planet, by Marcel Jeucken. Earthscan
Publications, Ltd, 2001.
Buy this book at Amazon.com