Does the Financial System Promote Sustainable Development? Evidence from Eastern European Countries

This article aims at analyzing the relationship between sustainable development and the financial system, mainly focusing on the role that the financial system plays within the process of sustainable development. Theoretically, the financial system could be a very important factor to promote sustainable development, as it could foster economic growth and development, efficient resource allocation, the protection of the environment and also social responsibility. Using panel data econometrical analysis, we tested for correlations between indicators of the financial system and indicators of sustainable development in five developing Eastern European countries. We found weak or no correlation between financial indicators and sustainable development indicators. This might be explained by several facts. First, the financial systems of these five developing countries are not highly developed, so that they do not have a high capacity to foster economic growth and development. Second, even if this was the case, promoting sustainable development requires a lot more than fostering economic growth and is not a question of whether the financial companies can promote sustainability, but whether they are interested in promoting it. Even though financial companies have embraced the sustainability agenda, they haven`t done much to change their short-term orientation to profit and to shift to long-run strategies in favor of sustainable development.