Symposium Marketing and social responsibility in banks Belgrade, 11-12.04.2012 © www.dimplex-resource.co.uk Transition to Sustainability A snapshot of Current Trends in the Financial Sector Harry Papageorgiou Head, Group Environment & Quality Division, Eurobank EFG Group Chair, European Task Force UNEP FI Head, Sustainability Committee Hellenic Bank Association Sustainability & Sustainable Development: Definitions ESG Corporate Social Responsibility A generic term usually traced back to the initial work of United Nations Global Compact on financial markets and sustainability issues, now widely used in capital markets by investors The origins of Corporate Social Responsibility (CSR) terminology are closer to the corporate sector itself, with a distinct focus on the concerns, needs and expectations of society ESG (environmental, social and governance) factors are considered as a subset of non-financial performance indicators, which serve to evaluate corporate behaviour and determine the future financial performance of companies As such CSR addresses the integration of issues of concern to society in companies’ business operations and their interaction with stakeholders, on a voluntary basis Social Responsibilities of the Businessman, Howard Bowen, 1953 United Nations Global Compact Who Cares Wins Series, 2004-2008 http://www.unglobalcompact.org/Issues/financial_markets/index.html Corporate Citizenship Business Ethics Business Ethics is an approach founded more closely on ethical and moral beliefs: what is the right (or wrong) thing to do? When the actions of individuals and firms, in the pursuit of self-interest and profits, adversely affect others, it is an ethical imperative to exercise appropriate constraint Corporate Citizenship is a concept close to CSR but perhaps preferred by some (and especially in North America) for its more intimate connection to the communities directly surrounding the corporation Corporate Citizenship strives to meet the social, cultural and environmental responsibilities with the community wherein which the institution seeks a license to operate, as well as economic and financial responsibilities to its shareholders or immediate stakeholders Sustainability The Brundtland Commission, UN 1987 “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” This definition is supported by the equally widely acknowledged three pillars: economic, social and environmental development http://www.un-documents.net/wced-ocf.htm UNEP FI Guide to Banking & Sustainability Sustainability & Sustainable Development: Corporate Sustainability Sustainability & Sustainable Development: What is it about? Sustainability & Sustainable Development & The Green Economy The Green Economy "Support for the green economy and the environment goes hand-inhand with the Cohesion Policy's objective to deliver sustainable growth, jobs and competitiveness In a difficult financial climate, this investment will be instrumental in creating long-term employment and reviving local economies, as well as underpinning the EU's commitment to the fight against climate change." Danuta Hübner, European Commissioner for Regional Policy (9/3/2009) …and The Financial Sector The financial sector can play a critical role in the transformation to a more sustainable environment As financial intermediaries in an economy, financial institutions can contribute to mitigating environmental problems, while at the same time taking advantage of the opportunities that sustainability offers to the finance sector [UNEP FI (2004): Finance & Sustainability in CEE] Sustainability & Sustainable Development: Confusing? ESG ? Reporting ? Green Economy ? CSR ? Business Ethics ? Operational Footprint ? Sustainability? Risks ? Citizenship ? Sustainability & Sustainable Development: Simplified Operational Footprint Sustainability at the Office Products and Services Green/Sustainable Portfolio Risks and Liability Environmental & Social Risk Management Sponsorships and Social Responsibility NGOs and volunteerism Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office Environmental/Quality/Health & Safety Management Systems Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office Resource/Material Flow Analysis e.g Energy Data Input Quality and Precision Energy mix - Renewables Procurement Informed Decision Making Indicators Energy Flow per source/per area/ per building/ per person Opportunities -Offsetting -Carbon Neutral Bank Market/Legislation Monitoring Material Flow Management Savings Programme Use Output GHG Emissions Top Spenders/Top savers Statistics: Building/Counter (in conjunction with CC allocations) Reporting Indicators Benchmarking Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office 10 Environmental Liability & the Financial Sector Commercial Banks Why Bother? Financial Risks Legal Risks Reputation Risks Potential Liabilities through control of client management and decision making Possession of assets 27 Environmental Liability & the Financial Sector Commercial Banks Why Bother? Financial Risks Legal Risks Reputation Risks Association with polluting customer/project Vulnerability to NGO and media attacks 28 Environmental Liability & the Banking Sector Incentives & Disincentives for Environmental Risk Management Incentives Disincentives Risk Identification & Management Costs Customer Relationships Customer Relationships Competition Competition Compliance with Basel II Potential Management Involvement Claims Development of Green Products & Services Other Products (Insurance Policies Etc) Lack of internal knowhow Unstable and incomprehensive regulatory regime 29 Sustainability & Sustainable Development: Simplified Sustainability at the Office Green/Sustainable Portfolio Environmental & Social Risk Management Sponsorships and Social Responsibility NGOs and volunteerism 30 Sustainability & Banking: Simplified Communications, Sponsorships and Social Responsibility Sustainability profiling, NGOs and volunteerism 31 Sustainability & Banking: Simplified Communications, Sponsorships and Social Responsibility Sustainability profiling, NGOs and volunteerism Basic Thoughts Increasingly crucial for reputation management Stakeholder mapping essential Very often blamed for “green washing” Should be embedded in overall Sustainability Strategy Environmental/social benefits should be crystal clear Carefully selected partnerships with NGOs Volunteerism an essential element “Walk the talk”, or “practice what you preach” Engage with international networks and initiatives (UNEP FI, Global Compact, etc) 32 Sustainability & Banking: How? Management Commitment Sustainability Management Systems Roles and Responsibilities Reporting 33 Sustainability & Banking: How? Management Commitment Sustainability Management Systems Roles and Responsibilities Reporting Sustainability Policy Key commitments’ framework Signed/Approved by CEO Sector Policies In line with key commitments Applicable to suppliers/customers etc Sustainability Committees Senior Management Representatives Regular Meetings 34 Sustainability & Banking: How? Management Commitment Sustainability Management Systems Roles and Responsibilities Reporting Footprint Management Globally Recognised Standards (ISO14001/EMAS etc) Environmental & Social Risk Management A special focus to Relationship Managers Internal knowhow and Sector Libraries Monitoring Progress and Continuous Improvement SMART Indicators (Specific, Measurable, Achievable, Relevant, Time-bound) Regular Meetings Products and Services Support sustainable innovation Develop and share know-how New products and services 35 Sustainability & Banking: How? Management Commitment Sustainability Management Systems Roles and Responsibilities Reporting http://www.unepfi.org/publications/banking/index.html 36 Sustainability & Banking: How? Management Commitment Sustainability Management Systems Roles and Responsibilities Reporting Audits and Verifications Increased Transparency and Credibility Sustainability Reporting Frameworks/Indexes Global Reporting Initiative (GRI) Dow Jones Sustainability Index (DJSI) FTSE4Good Carbon Disclosure Project 37 Sustainability & Banking: Reporting Why ? (1) (Socially) Responsible Investment [(S)RI] - Sustainable Investment (SI) Increasingly, investors are diversifying their portfolios by investing in companies that set industry-wide best practices with regard to sustainability, because: Attractiveness Sustainability aims to increase long-term shareholder value Sustainability performance financially quantified – investable corporate sustainability concept Superior performance and risk/return profiles A growing number of investors are convinced that sustainability is a catalyst for enlightened and disciplined management, and, thus, a crucial success factor 38 Sustainability & Banking: Reporting Why ? (2) (Source: European sustainable investment forum study EUROSIF 2010) Sustainable investment is now largely perceived by the European HNWI population as a financial discipline rather than an investment style Specific knowledge of ESG (environmental, social and corporate governance) issues necessary in order to be successful An explanation of impressing market growth (even in difficult times) Eurosif estimates the 2010 European HNWI sustainable investment market to be approximately €729 billion, representing approximately 11% of European HNWIs’ portfolios as of December 31, 2009 This is a growth rate of 35% over the two-year period since the data was previously collected 39 Sustainability & Banking: Why Bother? Key reasons why banks consider sustainability issues Increased credibility and gain in reputation ? Demand by investors ? Lower risk and better returns ? Increased value to stakeholders ? Potential for business development ? Liabilities ? Non-performing loan experience ? Demand by clients ? 40 Transition to Sustainability Key Messages Sustainable Banks are definitely the Banks of the Future Top Management Commitment Integrate Environmental & Sustainability Strategies in core business Sustainability Management: a systems approach A growing need for the development of internal sustainability capacity, structures and know-how Open communication & collaboration with stakeholders – commonly agreed processes Environmental Risk Awareness & Management in Banking & Investment doesn’t mean sector exclusions and credit rejections but rather informed decision making and improved customer relationships - opportunities Participation in international initiatives & networks (e.g UNEP FI, Global Compact etc), external communications, partnerships with NGOs We practice what we preach, so that we don’t face “green washing” accusations 41 ... http://www.un-documents.net/wced-ocf.htm UNEP FI Guide to Banking & Sustainability Sustainability & Sustainable Development: Corporate Sustainability Sustainability & Sustainable Development: What is it about? Sustainability & Sustainable... time taking advantage of the opportunities that sustainability offers to the finance sector [UNEP FI (2004): Finance & Sustainability in CEE] Sustainability & Sustainable Development: Confusing?... Institutional Investors Growing Attention and measures due to major environmental incidents Ethical, Socially Responsible, Sustainability, Green FUNDS Sustainability Indices (FTSE4Good, Dow Jones Sustainability