Sustainability in banks’ corporate governance systems. What evidence from the European Banking System?

The corporate governance of banks, including management structures, employee relations and executive remuneration, plays a fundamental role in ensuring the inclusion of social and environmental considerations in the decision making process. Many Supervisory Authorities are starting to focus on this important issue. Indeed, as the OECD Corporate Governance principles stated, «the board is not only accountable to the company and its shareholders but also has a duty to act in their best interests. Boards are expected to take due regard of, and deal fairly with, other stakeholder interests including those of employees, creditors, customers, suppliers and local communities. Observance of environmental and social standards is relevant in this context» (G20/OECD, 2015). Recently, the High-Level Expert Group on Sustainable Finance, in its final report, stated that the composition of executive and supervisory governing bodies is the key lever for aligning businesses more closely with long-term and sustainability perspectives. Business success hinges on executive and non-executive supervisory directors understanding sustainability. In line with these considerations, this paper aims to explore the level of integration of sustainability strategies and considerations in the banks’ corporate governance systems. drivers and being able to translate the risks and opportunities into their business models. Moreover, financial sector supervisory authorities should assess whether members of governing bodies are able to anticipate longer-term risks and sustainability challenges and whether they take account of sustainability considerations as part of their decisions processes.