Opinion: Yes, a strong civil society can hold financial institutions to account!

01 November 2021

“Of course, we take this very seriously”, replied the spokesperson for a major Swedish bank when a journalist asked about their investments in a company that once again spilled huge amounts of oil in the Niger Delta, further destroying the livelihoods of local communities. Personally, I knew that this was nonsense because at this time I was working in the financial industry and had a good insight into the workings of the sector.

Jakob König, Leader of the Fair Finance Guide Sweden illustrates how an engaged civil society really can affect positive change within the financial industry.

Most people now agree that banks, pension funds and other financial actors play a crucial role in achieving the sustainable development goals. We know this because when we talk about various challenges such as climate change, environmental degradation or human rights violations, it often involves companies around the world and their supply chains that may be causing or contributing to the problems.

Companies are also sitting on possible solutions if they switch to a sustainable and responsible business. This is where the financial industry comes in because at the top of the companies are banks and pension funds that own and finance the companies. They decide which companies will receive money and how they will conduct their business. Crucially, they decide whether companies should prioritize long-term sustainability or short-term profits. Unfortunately, the latter still dominates.

After working a few years as a sustainability analyst in the financial industry, I increasingly felt like a cog in a PR machine that maintained a false image of responsibility. It works because bank customers and pension savers do not have insight, while environmental and human rights organizations have difficulty scrutinizing and challenging the industry. Politicians and authorities are also easily dazzled by a bank that talks about high ambitions and presents some good examples. But, of course, they don't tell the whole truth.

So I left my job and started Fair Finance Guide in Sweden together with the Swedish Consumers’ Association, Diakonia, Amnesty and some other civil society organizations. Together we assess Swedish banks' sustainability promises, initiate dialogue and hold them to account.

Since then, we have revealed that Swedish banks are investing billions in companies that export arms to the Yemen conflict, that support the military junta in Myanmar, that drive the deforestation and fires in the Amazon, that are linked to child labour in the extraction of cobalt and that are destroying the climate through their coal and oil operations. We have also scrutinized the banks' main defences; their engagement with companies; and shown that the processes are weak and sometimes do not exist at all.

The response from Swedish bank clients and consumers has been massive. More than 35,000 people have made complaints to their bank, which is a huge number compared to the occasional protests they have received in the past. I know, because I was on the inside.

The impact on banks has also been immense. No one wants to be last in our rankings nor be accused of breaking their own promises. A resigning sustainability manager at a major bank wrote a debate article saying that scrutiny from civil society and increased client pressure is "extremely important" in moving the industry forward.

The financial industry is still a secretive and powerful business that often escapes demands for social responsibility. What the Fair Finance  Guide has shown, however is that with the help of independent scrutiny, increased consumer pressure and a civil society that can hold financial institutions to account it is possible to push for real change within the industry.