New Climate Principles for Financial Institutions

December 30, 2008

On the 4th December 2008, five leading financial institutions signed up to the Climate Principles, new guidelines developed to deal with the risks and opportunities posed by climate change.

The initial take-up was not as wide as hoped, possibly due to the financial crisis. However, Banks Crédit Agricole, HSBC, Standard Chartered, and reinsurers Swiss Re and Munich Re in signing up to what the Climate Group describes as “the first comprehensive industry framework” to address climate change.

The Climate Principles address the management of operational greenhouse gas (GHG) emissions. More importantly, they provide strategic direction on managing climate change across the full range of financial products and services, including: research activities; asset management; retail banking; insurance & re-insurance; corporate banking; investment banking & markets; project finance.


2008 FT Sustainable Banking Awards

March 31, 2008

There have been a record number of entries for the FT Sustainable Banking Awards this year, with 128 institutions in 54 countries submitting a total of 181 applications

The awards were created by the Financial Times and IFC, a member of the World Bank Group, to recognise banks and other financial institutions that have shown leadership and innovation in integrating social, environmental and corporate governance considerations into their operations.

The winners of the awards will be announced at a special dinner at the Dorchester in London on 3 June 2008.

New IFC Report – Banking on Sustainability (March 2007)

March 30, 2007

A new IFC report “Banking on Sustainability,” has been released.  It provides practical examples of 14 financial institutions in 12 countries that have taken concrete steps to integrate sustainability into their policies, practices, products, and services.

“While detailing the evidence of potential benefits for banks in integrating sustainability into their business strategy, the report reveals a dramatic shift in banks’ awareness of these benefits,” said Rachel Kyte, IFC Director of Environment and Social Development.

In a 2005 IFC survey, 86 percent of 120 financial institutions interviewed reported positive changes as a result of steps they had taken to integrate social and environmental issues in their business.The report shows evidence of the potential benefits of adopting sustainability as a business strategy. It also shows a dramatic shift in banks’ awareness of these benefits. Banks can tap vast benefits by reassessing their business practices and engaging in sustainability-oriented risk management and product development.

It is notoriously difficult to quantify the financial benefits of adopting sustainable business practices, however this report demonstrates some clear business benefits from adopting and integrating environmental and social considerations into core business strategies.

Banks consider how to include climate change in their investment decisions

January 25, 2007

London, 11 January: A group of investment banks is to investigate how best to include climate change in investment decisions.

The London Accord will seek to provide investors with more information on how best to make investments that address climate change. Sponsored by the City of London Corporation and BP, the project already has the support of investment banks including Morgan Stanley, Bank Sarasin, HSBC, Société Générale, Credit Suisse and Canaccord Adams.

“If you look at the field of climate change and investment decision-making, lots of people are aware of it and want to integrate it into their decisions. But not many people are sure of how you go about it,” said project director Jan-Peter Onstwedder, who was previously head of risk in BP’s supply and trading business.

Extract from Environmental Finance

Key discussions at the Ethical Finance Summit

December 5, 2006

There were some excellent discussions on the Equator Principles (EP) at the Ethical Corporation – Sustainable Finance Summit. The main hot topics were:

  • The need to manage the success of the principles. The need to prevent their extension to areas other than Project Finance weakening the brand, due to insufficient leverage in such areas.
  • The EP’s have lead to an unprecedented level of collaboration by Financial Institutions.
  • There is a lack of mechanisms for demonstrating how the adoption of the EP’s have contributed to business performance and financial benefits, but despite this FI’s are see these issues as key to their core branding.
  • There is a need for a pragmatic approach to their application, in certain situations when good project sponsors and FI’s have turned down projects with high potential environmental and social risks, the projects have been progressed by weaker parties and consequently developed more severe environmental and social problems.
  • There is a need to manage expectations about what the EP’s will achieve – e.g. they have not been established to be a tool for equity.
  • There has been a lack of developing market banks and a notable absence of leading French Banks adopting the EP’s.
  • The need for sufficient lead in times to review Finance deals to avoid situations where problems are picked up too late on a project to enable compliance.
  • Some banks are striving to be leaders in sustainability, while others believe the EP’s have created a level playing field.

The Do’s and Don’ts of Sustainable Banking; a BankTrack manual

December 1, 2006

BankTrack, the NGO network monitoring the private financial sector, presented their new publication, ‘The Do’s and Don’ts of Sustainable Banking; a BankTrack manual’, at the Ethical Corporations’ ‘Sustainable Finance Summit’ in London.

According to Banktrack:
The manual seeks to answer the straightforward question posed to the panel; ‘what does a really sustainable bank look like?’.

  • Banks should, for example, change their bonus schemes to emphasise implementation of environmental and social policy and long-term prudence instead of short-term profits.
  • BankTrack advises banks to ensure that sustainability policies are actually implemented, rather than used as a public relations tool.
  • International banks are told to engage with emerging banks to improve their standards, rather than just complain that there is an uneven playing field.
  • Advising investors to put their money into shares that do not meet the bank’s own minimum standards is also listed as a “don’t” by BankTrack.

It follows the outline of the Collevecchio Declaration, released in 2003, which calls upon financial institutions to embrace six commitments:

  1. Sustainability;
  2. Do No Harm;
  3. Responsibility;
  4. Accountability;
  5. Transparency; and
  6. Sustainable Markets and Governance.

The new manual should be seen as the updated implementation guidelines to the Collevechio Declaration, incorporating the latest thinking and expectations of civil society groups on the subject.

Workers’ rights top list of ethical investor concerns

November 23, 2006

A survey of investor has found their key concerns include workers conditions, involvement in arms trade and environmental pollution.

Extract from Environmental Finance:

London, 16 November: Ethical fund managers should favour companies that maintain high standards of working conditions in their supply chains, according to a survey of investors released this week.

UK investment management company Standard Life polled close to 1,200 of its ethical investors, asking them to rank the issues of most importance to them.

Workers’ conditions topped the rankings, which also revealed that the environment was a major concern among investors. The provision of pollution control products or services, and the development and use renewable energy, were placed second and third in terms of importance.

Standard Life Investments manages approximately £130 billion ($245 billion) of assets, £425 million of which is ethically invested. It uses the survey to adapt its investment policy in line with investors’ views on issues such as community involvement, employment policies, corporate governance, alcohol, gambling and animal testing.

The investors said fund managers should avoid investing in companies and countries with poor human rights records, companies involved in the arms trade, and those that are responsible for clearing tropical forests.