Examining Finance and Sustainability: A Comprehensive Review

This literature review explores the intersection of finance and sustainability, emphasizing the crucial role of stakeholders and their impact on the banking sector. It examines sustainability reporting, stakeholder engagement, and the influence of various stakeholders on banks' environmental and social performance. The review also touches upon sustainability in developing countries, liquidity management, and the role of Zakat in promoting sustainable development. It proposes a research model based on Ullman's theory to explain the relationship between social performance, economic performance, and social disclosures, highlighting both theoretical and practical contributions to the field, particularly in the context of Saudi Arabia's banking system. Desklib provides access to this and similar assignments for students.

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FINANCE AND SUSTAINABILITY
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Table of Contents
Literature Review.......................................................................................................................2
Sustainability..........................................................................................................................2
Stakeholders...........................................................................................................................4
Banking Sector.......................................................................................................................5
Research Model..........................................................................................................................6
Contributions..............................................................................................................................7
Reference....................................................................................................................................8

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Literature Review
Sustainability
World commission on Environment and Development (1987) has highlighted the
impact of the business activities of the company on the society and the environment. It was
due to this there was growing awareness internationally for these impacts that resulted in the
introduction of the concept of sustainable development. The sustainability development is
much far from being the definitive harmony condition, it is considered rather the process of
the change, exploitations of the resources, investments directions, technological development
orientations and changes in the institutions are made consistent with the current needs as well
as future needs. According to Souad S. Moufty, it is difficult to achieve corporate
sustainability without engagement of the different groups of stakeholders as well as
implementations of the strategy of the sustainability (Moufty, 2017). According to Michael
Carley, in the world where there is the problems of environmental are spill across the
administrative, political and disciplinary boundaries, it has become pressing need for the clear
understanding of the organizations kinds, structures of management and the approaches of
policy making that are required for bringing equitable socially as well as ecologically
sustainable development. According to Goran Ingvar Broman, the framework for the strategic
sustainable development has proved for aid the organizations in the thorough understanding
as well as putting themselves in context of challenge of global sustainability and moving
themselves towards the strategically sustainability (Broman & Robèrt, 2017).
Sustainability and Stakeholders
Sustainability and stakeholders are closely related, it is due to the fact that, without
taking into account the stakeholders, it is difficult to achieve sustainability. According to
Belen, the transparency of the sustainability is generally affected by the companies’

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relationship in the different industries with their stakeholders (Fernandez et al. 2014). Banks
needs for increasing the engagement with the stakeholders as the part of the process of
sustainability. According to Donal, due to the asymmetry of the information, the stakeholders
struggle for comprehending the actual change in the practices of firm (Crilly, Hansen &
Zollo, 2016). The sustainability is influenced by the stakeholders of bank as well as
managers, who are required for defining the criteria and goals of the corporate sustainability
with that of the stakeholders in the most communicative manner. According to Nicola,
sustainability reporting helps in describing how to deal with environmental, social and
economic impacts by making stakeholders recognizing practices of sustainable value
(Bellantuono, Pontrandolfo & Scozzi, 2016).
Sustainability Reporting
Sustainability reporting is reporting by the organizations on the impacts of social,
economical and environmental. Stakeholders impose pressures on the banks relating to the
impacts of economical activities on the society as well as environment. Therefore, it calls for
the banks in order to report on their environmental and social performances that are
increasingly being made. According to Ioannis, governance process key aspect inside the
organization as well the in the market is the measurements and the disclosures of the
important information and the matrices (Ioannou & Serafeim, 2017).
Sustainability in Financial Sector
Sustainability in the banking sector is the decisions by the banks for providing
products and services to the stakeholders who takes the social and environmental
considerations impacts of their activities. Aligning the financial system with the sustainable
development improves the effectiveness of the financial system in the mobilization of capital
towards the green as well as inclusive economy.

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Stakeholders
Stakeholders Engagement
Stakeholders is the group or the person that have rights, ownership, claims or the
interest in the organizations as well as its activities of present, past and future. According to
Anna Lee, the corporate invests in the corporate community investment by the community
partnership and it can be done most effectively by funding structure based on the community
partners’ perspectives (Rowe et al. 2014). There is the need for the stakeholders because the
power and the influence of the stakeholders may affect the failure and success of the
initiative. According to Laura Sierra, the increasing interest in the integrated reporting has
insisted the companies for paying attention in producing the integrated reporting and linking
it with the assurances of corporate social responsibility (Sierra‐García, Zorio‐Grima &
García‐Benau, 2015). In order to be successful banks, there must be management of the
relationship that exists between stakeholders as well as the organizations. According to
Corinna Dogi, the market stakeholders influences are stronger in the developed countries,
where there is influences of social and regulatory stakeholders does not differ significantly
between two country groups. Therefore, the relationship between the CER practices and the
positive business outcome is stronger (Dogi & Behnam, 2015).
Categories
According to Souad S. Moufty, in the banks of USA and EU, the primary
stakeholders are more important than that of the secondary stakeholders. The primary
stakeholder consists of society and environment, community and the government. Moreover,
secondary stakeholders consist of suppliers, financial advisors, public, rating agencies as well
as press. The European banks care for both the groups of stakeholders than that of the banks
of America (Moufty, 2017).

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Banking Sector
Banking sector in Developing Countries
It is due to increasing challenges for the sustainability issue in the business activities
of the banks, it is necessary. In the banks of China, there is the influence by the pressure of
institutions for integrating the issues of social as well as environmental in the business,
products and services strategies.
The results have showed that in sustainability reports of the banks of UAE and Saudi
Arabia, the overall disclosures of sustainability was low. It is due to the fact that Islamic
principles of finance support the promoting of development, socially inclusive as well as
activities that are environmental friendly.
In Turkey, the assessment of the corporate sustainability performance was established
by the banks, which has concluded that the banks score will be improved when the
performance of all the dimensions will be improved such as social, economic, environment
governance and financial corporate sustainability.
According to Vi-in Hu, there are significant differences in the scores of CSR among
the countries and the individual banks (Hu & Scholtens, 2014).
Liquidity
In order to be successful banks, good management is required between the
stakeholders and the banks for being successful as well as helping in meeting both the needs
of banks and the stakeholders. Profitability of the banks can be improved if the stakeholders
get their rights, properly management of their associations and well as if they take part in the
decisions regarding the welfare. Liquidly helps the company to grow in the controlled as well
as sustainable way. Hence, under this scenario, bank should be in the position for offering
best liquidity management. According to Ivo, the globalization of financial market as well as

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financial crisis negative consequences results in the negative connotations of the operations
of financial institutions, which requires methodology of risk management (Županović, 2014).
According to Amin Jan, after the conducted studies on the sustainability of Islamic banks and
bankruptcy, it has been found that there is the great significance of achieving the strong
sustainability of the banking sector and the linked activities of banking that result in the
success of the financial system and vice versa (Jan & Marimuthu, 2015). According to M
Kabir, the balance should be strike by the Islamic banks between the societal, environmental
as well as environmental sustainability for achieving Sharia objective (Aliyu et al. 2017).
Zakat
It is the financial indicator for accessing the growth of economy. It helps in
contributing for achieving the objectives of sustainable development by helping the needy as
well as poor people. As per Sheriff, Zakat plays the important role for the zakat institutions
for creating collective social security scheme for the mutual or sympathetic help among the
societies of Muslim. Therefore, it enhances sustainable development (Ibrahim, 2015).
According to Mahani Haji, banks generally do not view CSR as the strategy of business
marketing as well as charity rather as the responsibility towards the God and the welfare of
the society. The competitiveness of the country lies in the commitment for implementing
effectively CSR in the Islamic banks while maintaining the long-term sustainable economic
system (Hamdan, 2014).
Research Model
The research model that can be used for the research proposal is Ullman’s theory of
three dimensional model that helps in explaining the relationship among the social
performance, economic performance and social disclosures. The model of three-dimensional
consists of the strategic posture, stakeholder power and economic performance that explain

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why there are engagements of the companies in the activities of socially responsible. The
author has viewed the social performance as the result of the strategy for dealing with the
demands of the stakeholders (Moufty, 2017).
Contributions
Theoretical Contributions
This research will helps in identifying the relationship between the sustainability and
the performance of the banks and based on the model used in the research more ways of
developing sustainability in the financial sector can be contributed. This result would be
contributing to the industry for removing the gap that exists between economic performances
and social disclosures. Under, the study, the sustainability of banks in relation to the
sustainability in Saudi Arabia are taken into consideration. The result of the study of it will
give the explanation of the banking system and sustainability in Saudi Arabia and contribute
for gaining the required knowledge towards it.
Practical Contributions
The research will contribute towards adopting the sustainability practices by the
companies with the help of CSR engagement and disclosure sustainability time to time by the
company for helping the stakeholders to know about the company’s efforts towards
sustainable development. The framework used described by the research could be used by the
companies for in providing the sustainability and disclosure reports and facts to the
stakeholders while social welfare. Moreover, the improvement in the overall performance in
all this dimension will provide more substantial contribution to overall score of the bank and
rank them for having higher score in the dimensions of sustainable development.

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Reference
Aliyu, S., Hassan, M. K., Mohd Yusof, R., & Naiimi, N. (2017). Islamic banking
sustainability: A review of literature and directions for future research. Emerging
Markets Finance and Trade, 53(2), 440-470.
Bellantuono, N., Pontrandolfo, P., & Scozzi, B. (2016). Capturing the stakeholders’ view in
sustainability reporting: a novel approach. Sustainability, 8(4), 379.
Broman, G. I., & Robèrt, K. H. (2017). A framework for strategic sustainable
development. Journal of Cleaner Production, 140, 17-31.
Carley, M., & Christie, I. (2017). Managing sustainable development. Routledge.
Crilly, D., Hansen, M., & Zollo, M. (2016). The grammar of decoupling: A cognitive-
linguistic perspective on firms’ sustainability claims and stakeholders’
interpretation. Academy of Management Journal, 59(2), 705-729.
Dögl, C., & Behnam, M. (2015). Environmentally sustainable development through
stakeholder engagement in developed and emerging countries. Business Strategy and
the Environment, 24(6), 583-600.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’ pressure on
transparency of sustainability reports within the GRI framework. Journal of business
ethics, 122(1), 53-63.
Hamdan, M. H. (2014). Corporate social responsibility of Islamic banks in Brunei
Darussalam. In Corporate Social Responsibility in Asia (pp. 85-107). Springer, Cham.
Hu, V. I., & Scholtens, B. (2014). Corporate social responsibility policies of commercial
banks in developing countries. Sustainable Development, 22(4), 276-288.

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Ibrahim, S. M. (2015). The role of zakat in establishing social welfare and economic
sustainability. Jeddah: IRTI-IDB.
Ioannou, I., & Serafeim, G. (2017). The consequences of mandatory corporate sustainability
reporting. Harvard Business School research working paper, (11-100).
Kumar, V., & Pansari, A. (2016). Competitive advantage through engagement. Journal of
Marketing Research, 53(4), 497-514.
Moufty, S. S. (2017). Sustainability Practices and their Effect on Performance in the Banking
Sector-A Stakeholder Approach (Doctoral dissertation, Brunel University London).
Rowe, A. L., Nowak, M., Quaddus, M., & Naude, M. (2014). Stakeholder engagement and
sustainable corporate community investment. Business Strategy and the
Environment, 23(7), 461-474.
Sierra‐García, L., Zorio‐Grima, A., & García‐Benau, M. A. (2015). Stakeholder engagement,
corporate social responsibility and integrated reporting: An exploratory
study. Corporate Social Responsibility and Environmental Management, 22(5), 286-
304.
Županović, I. (2014). Sustainable risk management in the banking sector. Journal of Central
Banking Theory and Practice, 3(1), 81-100.