How can European banks strategically strengthen their sustainable lending ecosystem?

Abstract

This thesis investigates the research question how European banks can strategically strengthen their sustainable lending ecosystem. The climate crisis along with other megatrends have shaped the financial industry significantly and the fast growth of sustainable finance provides both opportunities and threats to the traditional banking business model. To investigate how banks can strategically position themselves this study examines specialties around the sustainability-linked loan. By means of a driving forces analysis, the most important action fields for strategic decision-making for banks regarding the sustainability-linked loan have been identified. The analysis of those action fields shows that banks should aim to use the current momentum in sustainable finance and position themselves as pioneers to gain competitive advantage. The research further showed that there is an incentive for banks to use greenwashing methods regarding the sustainability-linked loan. To prevent greenwashing allegations, it is necessary to introduce sensible and standardized ESG-frameworks and key performance indicators early on along with preparing for future developments in the area of regulation.