The financial industry has a pivotal role in channeling capital flows. In the developed world it is becoming a wide practice of financial institutions to incorporate the issues of sustainability by the projects they finance. The relationship banks have with the environment is a recent phenomena and it might take time to analyze why one should be concerned. But ignoring the fact that there is something going on does not hinder the consequences from happening. The word sustainability is used in almost every sector because it is understood that the development of one sector in the expense of the other can not be whole. Thus that is why one should carefully analyze what probable relationship might there be with a problem in another sector. In this regard, It is only enough to understand that environmental risks also bring along business risks. This paper focuses on the role financial institutions play in the sustainability by taking in to consideration the projects they finance. It looks at the concept of sustainability and the experience of banks in the developed world. It also looks at the current practice in Ethiopia and the problems facing it. The author concludes that financial institutions play an important role in one’s economy and the healthy and smooth function of the sector contributes to the sustainable development of the country. In relation to sustainability, the concern of banks is regarding the projects they finance in which they play their role in promoting healthy investments. In developed countries, the involvement and concern of banks in sustainable project financing is in the increase. The problem is not only regarding the financial institutions, but also there is difficulty regarding the communication of the different sectors involved. The author also suggests some solutions which are:
a smooth and coherent system among the different sectors in Ethiopia
a strong legal procedure that govern and address all the concerned parties appropriately
development of qualified professionals so that there will be an efficient and fast response for the assistance requested by the banks/the project proponent
discussion of the matter with different sectors of the economy, the community and other stakeholders that are affected by the project
proper reporting regarding the project status to create a transparent and accountable system.