As we saw with the 2008 Financial Crisis, our current banking system is problematic, doesn’t serve everyone and presents risks to all of society.
Before the crisis, we saw the ‘privatisation of profits’, meaning only some people benefited from financial gains. When the crisis hit, we saw the ‘socialisation of losses’, meaning that we, as an entire society, shared the losses.
We need to reconfigure the banking system to include more diversification, to avoid the systemic collapse experienced in many countries, like the UK, where there is only one type of bank, which collapsed.
The German banking system is a good example, as it’s got a split between cooperative banks, state owned and commercial banks, ensuring that if one sector of the banking system crashes, the whole system doesn’t.
We would want more state involvement in sector, to incentivise responsible investment that is in the interest of all, for the long-term.
Investment management companies also have a role to play. The world’s largest one, BlackRock, sent a letter of all CEOs of companies in its portfolios to report on the climate risk of their business or risk the loss of investment. This is a large motivator for change in business.