Self-regulation in sustainable finance

The adoption of the Equator Principles

M.G. Contreras, J.W.B. Bos, S. Kleimeier

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Critical to the success of the Sustainable Development Goals is the extent to which financial institutions are willing to adopt voluntary regulation aimed at ensuring their actions contribute positively. We study the adoption of the most well-known set of rules, the Equator Principles, by applying a network approach to a unique data set containing 18,729 collaborations of financial institutions funding projects between 2003 and 2014 worldwide. We find that those exposed to the highest level of peer pressure by adopters are 33% more likely to also adopt, compared to those that face the lowest level of peer pressure. Even without this peer pressure institutions that already collaborate with adopters are more susceptible to become adopters themselves. Finally, external pressure applied through public campaigns increases adoption, although particularly large (and presumably powerful) institutions are immune to this external pressure. Our findings are particularly relevant for success of the recently launched Principles for Positive Impact Finance, that are heavily inspired by the Equator Principles.
Original languageEnglish
Pages (from-to)306-324
Number of pages19
JournalWorld Development
Volume122
DOIs
Publication statusPublished - Oct 2019

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self-regulation
finance
sustainable development
campaign
funding
regulation
Finance
Self-regulation
Peers
Financial institutions

Keywords

  • Sustainable Development Goals
  • Principles for Positive Impact Finance
  • Peer effects
  • Networks
  • Syndicated lending
  • Project finance
  • Equator Principles
  • Regulation
  • Banks
  • Corporate social responsibility
  • CORPORATE SOCIAL-RESPONSIBILITY
  • INTERORGANIZATIONAL IMITATION
  • DECENTRALIZED INSTITUTIONS
  • ENVIRONMENTAL-MANAGEMENT
  • LOAN SYNDICATION
  • FORMAL-STRUCTURE
  • PERFORMANCE
  • REPUTATION
  • INNOVATION
  • IMPACT

Cite this

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title = "Self-regulation in sustainable finance: The adoption of the Equator Principles",
abstract = "Critical to the success of the Sustainable Development Goals is the extent to which financial institutions are willing to adopt voluntary regulation aimed at ensuring their actions contribute positively. We study the adoption of the most well-known set of rules, the Equator Principles, by applying a network approach to a unique data set containing 18,729 collaborations of financial institutions funding projects between 2003 and 2014 worldwide. We find that those exposed to the highest level of peer pressure by adopters are 33{\%} more likely to also adopt, compared to those that face the lowest level of peer pressure. Even without this peer pressure institutions that already collaborate with adopters are more susceptible to become adopters themselves. Finally, external pressure applied through public campaigns increases adoption, although particularly large (and presumably powerful) institutions are immune to this external pressure. Our findings are particularly relevant for success of the recently launched Principles for Positive Impact Finance, that are heavily inspired by the Equator Principles.",
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author = "M.G. Contreras and J.W.B. Bos and S. Kleimeier",
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Self-regulation in sustainable finance : The adoption of the Equator Principles. / Contreras, M.G.; Bos, J.W.B.; Kleimeier, S.

In: World Development, Vol. 122, 10.2019, p. 306-324.

Research output: Contribution to journalArticleAcademicpeer-review

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