Equator Principles improve financial performance – the evidence is clearer than ever

There are increasing indications that banks are successfully distinguishing themselves by how they handle the environmental and social dimension of their operations. Those banks such as HSBC, ABN AMRO and Barclays, to name a few, but by no means all, have made an impressive effort to establish themselves as leaders in this field.

The real indicators of this are the increased shareholder support for banks they consider to be more sustainable and the rapid growth in Socially Responsible Assets. This is emphasised by shareholders efforts to place pressure on banks involvement in particular deals.

A little while ago, private banks cared about sustainability because it was good for their reputation and brand. Now it is about their bottom line. There is emerging evidence of a correlation between good environmental and social behavior and good financial performance. We find plenty of examples of this in IFC’s own portfolio. Key Results In a recent survey of bankers, IFC found that 65 percent reported tangible benefits from sustainable policies.

The Sustainable Banking Awards co-organized by the Financial Times and IFC have shown that banks are using sustainability as a driver for business growth and asset quality. The Sustainability Yearbook 2006, published jointly by Sustainable Asset Management and PriceWaterHouseCoopers, says that it has been able to a show a conclusive link between performance on sustainability issues and financial performance, and a correlation to creation of shareholder value.

This trend has not gone unnoticed by private investors: In the United States, the Social Investment Forum published a report in January of this year which found that socially responsible assets grew faster than the entire universe of managed assets in the United States during the past 10 years.

By Lars Thunell, Executive Vice President
International Finance Corporation, World Bank Group
July 6, 2006

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