Environmental regulation through financial institutions: New pathways for disseminating environmental policy

Institutions within the financial services sector have the potential to be an important facet of future systems of environmental governance. But whilst ad hoc policy initiatives have arisen in relation to the environmental roles of banks or insurers, to date the financial sector in general has been largely ignored by governments. Because the financial services sector is where wholesale decisions regarding future development, and thus pressures on the environment, arise, reform of investment, banking and insurance services to promote long term investment and better consideration of environmental impacts could be an effective way to promote sustainable development. Reforms such as stronger corporate environmental reporting requirements, mandatory environmental liability insurance, and lender liability for borrowers' environmental harms, are some of the ways in which an institutional framework for mobilising financial organisations as instruments of environmental regulation could be constructed.