CSR in Banking
A simple definition refers to CSR as how companies and financial institutions take into consideration the impact on society of their operational activities. Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. Consequently, it requires a built-in, self-regulating mechanism whereby businesses would monitor and ensure their adherence to law, ethical standards, and international norms to produce an overall positive impact on society.
CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. There are obvious and real gains on hand for banks which have well-designed and successful CSR strategies. They can promote their profile in the community they serve, enhance local, and cross-border economic performance, and enable community development, at the same time strengthening their profitability.
CSR practices are often implemented in banks’ core business, which is credit and investments. Project finance is one of the methods to get capital for investment opportunities. Banks consider how to fairly balance the risk and interests of the various participating parties, including protecting the interest of those who are directly and indirectly affected – specifically the local community that resides within or close to the area impacted by the project. It is recommended that banks recognize their responsibility to prevent or limit social and environmental harm that may have been caused by activities financed by them; they need to adopt appropriate analysis and verification procedures.
