Basel III intends to improve banks’ resilience to financial crises. This report provides constructive arguments that if the EU incorporates social and environmental criteria in the new standards, banks’ risk management and decision making processes, it will more effectively promote financial stability and be more capable of addressing diverse challenges banks are facing now and in the future. Moreover, such regulation would stimulate the financial sector to contribute to a more ecologically and socially sustainable, economically just and peaceful world. Sustainability criteria in capital requirements will encourage banks to better align their operations with economic, social and environmental needs. Regulators and supervisors who develop regulatory and supervisory tools should improve their understanding of sustainability risks.

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