credit-suisse Environmental Report 1997/1998 Unabridged version


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credit-suisse Environmental Report 1997/1998 Unabridged version

  1. 1. NOVEMBER 1998 CREDIT GROUP SUISSE ENVIRONMENTAL REPORT 1997/98 Unabridged version 7.12.1998
  2. 2. CONTENTS ALL THE TOPICS COVERED IN OUR REPORT FOREWORD Page 3 PORTRAIT OF CREDIT SUISSE GROUP 4 Bank in transition 4 Credit Suisse Group and the environment 5 System limit of this report 5 Key figures 5 ENVIRONMENTAL MANAGEMENT 6 Environmental policy 7 Planning 10 Implementation 13 Milestones 14 Monitoring 16 Benefits 17 Communication 18 Future and trends 19 PRODUCT ECOLOGY 20 Environmental risks are business risks 21 Environmental risks associated with the granting of loans and with real estate business 22 Environmental risks relating to project financing 23 Environmental risks in relation to third-party liability and property insurance and real estate business 23 Risk management in the environmental sector – environmental liability 25 Environmental aspects of investment business 26 Eco Efficiency 26 Fellowship Trust 28 Sustainable Performance Group goes public 29 Niche products in the environmental sector 30 WinCAT – catastrophe bond (Cat bond) 30 Energy contracting 30 Recycling of car components at Winterthur 31 Future and trends 32 Annex: Flow chart for checking credit risks 33 OPERATIONAL ECOLOGY 34 Ecology reflected by the reorientation 34 Environmental performance evaluation of Credit Suisse Group (Switzerland) 1996/97 36 Overview of our analyses 37 Future and trends 38 Key environmental figures – significance of comparisons 38 COMMUNICATIONS 40 External communications and commitments 40 Sponsorship and contributions 40 Internal communications 41 Our environmental standpoint 42 Our most important affiliations 42 Publications and literature 43 GLOSSARY 44 LINKS TO ENVIRONMENT-RELATED INTERNET PAGES 46 INFORMATION AND CONTACTS 47 Environmental Report 1997/98 Credit Suisse Group Page 2
  3. 3. FOREWORD CONTINUING COMMITMENT TO ENVIRONMENTAL PROTECTION Dear Reader, In our second environmental report, we provide our staff, customers and shareholders, as well as ecologically-oriented investors and interested members of the public, with information on our commitment to the environment. In April 1997 we were awarded the ISO 14001 environ- mental certificate for our Environmental Management System at our Swiss bank sites. As the first Swiss bank and the first major bank anywhere in the world to receive environmental certi- fication we know that this distinction is helping to strengthen our good reputation among our stakeholders. CSG is one of the first financial service providers to have committed itself to comprehensive environmental protection and we want to continue to play a pioneering role in the future. Our aim is to find ways of integrating environmental considerations into our banking and insurance business. Having already achieved a good number of successes in the field of operational ecology, we shall increasingly be turning our attention to product ecology and the new risks and opportunities that exist in the field of climate change. We want to utilise the major growth potential that exists in the field of ecologically-oriented asset management. The very good performance of our two environmental funds Eco Efficiency and Fellowship Trust shows that we are on the right track in this respect. A special challenge that we need to address is the evaluation of ecological risks in the context of project financing. As regards expanding our Environmental Management System and introducing new cost-cut- Our strengths, weaknesses ting measures, we shall increasingly focus on our major sites outside Switzerland as well. Ex- and near-term objectives perience has shown that efficient use of energy and materials can also result in lower costs. To give you a quick overview, a text A process of transformation is taking place not just within Credit Suisse Group (CSG), but box in the margin of each chapter throughout the whole media landscape. We have therefore decided to break new ground with will provide a brief summary of our our environmental report: in addition to this electronic version of the unabridged text, we are strengths, weaknesses and near- also publishing a 12-page summary in English, French, German and Italian. As well as saving term objectives in the area in ques- paper, this approach also ensures that you always have access to our most up-to-date infor- tion. mation. Environmental protection is an ongoing process. This report tells you about our successes to date and our ambitious targets. We would like to thank everyone who has helped produce this environmental report. We would also be interested to hear your views and constructive criti- cisms; we look forward to your feedback. Lukas Mühlemann Peter Lienhart Chief Executive Officer of Member of the CS Executive Board Credit Suisse Group Environmental Officer of CSG Environmental Report 1997/98 Credit Suisse Group Page 3
  4. 4. PORTRAIT CREDIT SUISSE GROUP Credit Suisse Group (CSG) is a global financial services company offering a compre- hensive range of banking and insurance products. Represented on all continents and in all major financial centres, it comprises four banking business units and one insurance business unit, each of which is geared to specific customer groups and markets: Credit Suisse (CS) Corporate and individual customer banking in Switzerland Credit Suisse Private Banking (CSPB) Services for Swiss and international private investors Credit Suisse First Boston (CSFB) Global investment banking Credit Suisse Asset Management (CSAM) Services for institutional investors worldwide Winterthur Insurance Global insurance business Bank in transition Since it published its first environmental report in 1996, Credit Suisse Group has undergone a fundamental change. On 1 January 1997, CS Holding, as it was then known - and which consisted primarily of the two full-service banks Credit Suisse (CS) and Swiss Volksbank (SVB) and the investment bank CS First Boston - became Credit Suisse Group. A separate environmental performance evaluation carried out to assess the environmental impact of the restructuring revealed that in the medium term the quantitatively measurable impact was roughly equivalent to that of one week of normal banking operations. Credit Suisse Group merged with Winterthur Insurance in the autumn of 1997, although Winterthur remains an operationally independent insurance company. In the context of the restructuring process, various operations with an environmental impact were outsourced to external contractors subject to agreements laying down ecological con- straints; these operations include, in particular, building management and storage and distri- bution in the material management sector. CSG organisation chart: position as at 1 January 1998. Insurance sites abroad only include national and company head offices Environmental Report 1997/98 Credit Suisse Group Page 4
  5. 5. PORTRAIT OUR KEY FIGURES Credit Suisse Group and the environment About 20 years ago, an Environmental Management System (EMS) was set up in the various companies comprising what is today Credit Suisse Group. As part of the reorientation of the Group, it was decided to use the EMS of Credit Suisse – the most sophisticated in the Group at the time – for the entire CSG. The Environmental Management System of the Swiss banking sites is certified to ISO 14001. Environmental focal points In addition to its environmental efforts on the operational front (primarily aimed at cutting energy consumption), CSG focuses mainly on checking environ- mental risks when granting credit or insurance cover. Increasingly, major earnings potential and opportunities are also emerging in the products sector. System limit of this report Unless otherwise indicated, this environmental report refers to the whole of CSG including Winterthur. The environmental performance evaluation referred to in the operational ecology section covers CSG’s banking sites in Switzerland and does not include Winterthur (reference date 1 January 1997). Key figures Key financial figures in CHF m CSG 1997 Credit Suisse (group) 1995 Balance sheet total: 689 568 m 245 000 m Annual profit: 397 m 1 230 m Key staff figures Staff 62 242 26 200 - in Switzerland: Bank 21 442 21 800 Insurance 7 108 - outside Switzerland: Bank 13 235 4 400 Insurance 20 457 Branches Total 1 166 - in Switzerland: Bank 304 430 Insurance 694 - outside Switzerland: Bank 118 106 Insurance* 50 *National and company head offices only Environmental Report 1997/98 Credit Suisse Group Page 5
  6. 6. ENVIRONMENTAL MANAGEMENT CERTIFIED TO ISO 1400 In April 1997, Credit Suisse Group became the first Swiss bank and the first major bank anywhere in the world to be awarded the ISO standard 14001 environmental certificate. The certification process provides independent confirmation of the fact that the Environmental Management System complies with this standard and that ongoing improvement in environmental performance has been provided for. This was also confirmed by the first control audit conducted in June 1998. Our EMS will be steadily expanded and extended along the lines of a modular system. The environmental certificate paves the way for our inclu- sion in portfolios of environmentally-oriented investors. Along with cost-savings and risk reductions, this represents the added value which we have created for our shareholders by taking account of environmen- tal considerations. The signing of the UNEP statements on the environment for both financial institutions and the insurance industry confirms this stance. The main aims of environmental management An Environmental Management System (EMS) conforming to ISO 14001 is designed to achieve the following objectives: Compliance with all relevant environmental laws and regulations n Commitment to the steady improvement of corporate environmental performance through n the formulation and implementation of defined objectives Steady improvement of corporate environmental performance of CSG Environmental Report 1997/98 Credit Suisse Group Page 6
  7. 7. ENVIRONMENTAL MANAGEMENT BASIC FEATURES OF OUR ENVIRONMENTAL POLICY The EMS is a feedback loop designed to achieve ongoing improvement. The various phases of the loop can be subdivided into environmental policy, planning, implementation, monitoring (certification, internal audits and review by senior management), as shown in the diagram on page 6. The following chapter is subdivided according to the same individual phases. 1 Environmental policy Uses and function of environmental policy Environmental policy defines the priority assigned to environmental protection within CSG, as well as representing a commitment to environmental protection vis-à-vis personnel, customers (private and corporate alike) and other stakeholders. Some of the important functions required of environmental policy are: To underline the importance that CSG attaches to environmental protection n Commitment to observe relevant environmental legislation n For further information on UNEP, Commitment to continuous improvement of environmental performance n see links on page 46 To take account of the demands of internal and external stakeholders n Environmental policy based on the UNEP statements for financial service providers In signing the UNEP statements for financial institutions and the in- surance industry, CSG has committed itself to the systematic incorporation of environmental considerations into all areas of its business activities. In 1992, the then Credit Suisse be- came the first signatory of the UNEP Statement by Financial Institutions and in 1995, Winterthur signed the UNEP Statement by the Insurance Industry. The signatories (110 Strengths banks + 70 insurers by May 1998) endorse the principles laid down in the two statements and strive to promote environmental interests and sustainable development in their business ISO 14001 certification of all CSG’s n policies and operations. Swiss banking sites since April 1997 Environmental policy extended to n Review of environmental policy In the autumn of 1998, our environmental policy was Winterthur updated and approved by the Chief Executive Officer of CSG. Key changes are the inclusion of Winterthur and the commitment to remaining environmentally certifiable. Maintenance of Outsourcing: ecological targets n conformity with environmental legislation was included as an explicit goal. agreed The environmental policy will be reviewed every three years, at the latest in the autumn of 2001. Weaknesses The text of the environmental policy is reproduced on the following two pages. Systematic environmental manage- n ment so far only introduced in Swit- zerland Organisational structures and pro- n cedures in environmental manage- ment still tied strongly to specific individuals Next steps / objectives Maintenance of eligibility for certifica- n tion Extension of Environmental Manage- n ment System to sites outside Switzer- land and subsidiaries Environmental Report 1997/98 Credit Suisse Group Page 7
  8. 8. ENVIRONMENTAL MANAGEMENT OUR ENVIRONMENTAL POLICY 1. Corporate leadership and management We are actively committed to environ- Environmental mission mental protection. Our commitment stems from the belief that our future depends on the statement / objectives conservation of natural resources. “We support efforts to protect the envi- We strive to be among the most progressive companies in terms of environmental manage- ronment and ease pressure on natural ment and we maintain an environmental management system in compliance with the relevant resources. By acting in an environmen- standards. We always seek to use the most ecologically sound technology wherever this is tally responsible fashion we wish to economically viable. We are committed to satisfying the regional, national and international contribute to sustainability and there- environmental standards applicable to our business operations and services and our commit- fore create added value for our com- ments under the UNEP and ICC Declarations. We use a systematic eco-monitoring strategy pany, our customers and the environ- to manage, evaluate and document the progress of our work. ment.” 2. Human resources work and organisation All employees of our bank are respon- sible for protection of the environment in their particular area of activity. They are supported by internal or external experts. We take measures to ensure that staff recognise their ecological responsibility and act ac- cordingly; activities which have an impact on the environment should also be assessed from the ecological point of view. 3. Communications and marketing Our bank is an environmentally conscious com- pany. We therefore conduct an open dialogue both inside the company and outside. Our en- vironmental data are accessible. We co-operate actively with external environmental organi- sations. Meeting our ecological responsibilities forms part of our strategy to secure long-term earn- ings and sustainable corporate development. 4. Banking and insurance products We aim to include environmental considerations in existing and new products and services in order to avoid ecological risks. We take account of such risks in evaluating lending and insurance transactions and provide support for our clients in dealing with risks and claims. Moreover, we aim to identify and avoid risks likely to harm the reputation of our institute. We are open to the development of new banking and insurance instruments for assessing ecological opportunities and risks and support research in this area. We promote efforts to demonstrate environmental costs and benefits and to evaluate ecological aspects in stockmarket analysis, both through our own developments and through active co-operation in research groups. Environmental Report 1997/98 Credit Suisse Group Page 8
  9. 9. ENVIRONMENTAL MANAGEMENT OUR ENVIRONMENTAL POLICY 5. Production and operations We ensure our high environmental and safety standards by continuously improving our environmental performance. Both in back- office operations and in the production process, we are committed to ensuring that our services are performed in the safest and most environmentally friendly manner possi- ble. We closely involve our procurement, management and logistics partners. We place particular emphasis on minimising electricity consumption and conserving resources, particularly in the processing of our standardised retail business. By systematically measuring, recording and monitoring energy and resource consump- tion, emissions, waste and environmental risks, we are paving the way for continuous improvements. We take measures to prevent environmentally harmful accidents and to contain the potential repercussions. 6. Infrastructure and facilities All available environmental data on design, mate- rials, operational matters and energy consumption are taken into account in the plan- ning and construction of new premises and facilities. We involve our contractors and suppliers in our efforts to protect the environment in order to ensure that they apply our environmental standards and codes of practice. In this context, we request information on potentially harmful building materials and other substances and on the impact of products supplied to us. 7. Implementation of the environmental policy To implement the environ- mental policy, we continue to pursue our internal corporate process aimed at promoting environmentally conscious behaviour at all levels. We attach great importance to the environmental policy being taken into account in all environmentally relevant decisions. Lukas Mühlemann Peter Lienhart Chief Executive Officer of Member of the Executive Board Credit Suisse Credit Suisse Group Environment Officer of Credit Suisse Group The current environmental policy was approved on 27 November 1998. It will be reviewed at least every three years and adapted where necessary. Environmental Report 1997/98 Credit Suisse Group Page 9
  10. 10. ENVIRONMENTAL MANAGEMENT PLANNING 2 Planning Dealing with the restructuring process and corresponding system changes The operations of a global financial services group involve a wide range of environmental considerations. CSG’s ever stronger and more global network is making the environmental sphere more complex. Piecemeal approaches to improving environmental performance are no longer adequate; the issue itself needs to be integrated into management. On the way to ISO certification, CSG had to surmount the hurdle of ongoing restructuring and system changes. Outsourcing measures are attributable to CSG’s concentration on its core business. However, the reorientation is also of environmental relevance. The following impor- tant services have been outsourced: Services Contractor Building management MIB AG n Decentralised IT systems IT Services n Catering Amongst others SV-Service n (CSG’s biggest catering contractor) Storage and distribution of office supplies, Mühlebach AG Logistic n printed matter and advertising materials In the following we set out our approaches to finding solutions: Agreements with companies in charge of outsourced areas Contracts and agreements were concluded which commit the contractors MIB AG, IT Services, SV-Service and Mühlebach AG Logistic to continuous improvement of their environmental performance and to compliance with CSG’s strict environmental standards. Among other things, these contractors are required to endorse CSG’s environmental policy and energy guidelines and to establish their own environmental management system. Open communication and co-opera- tion on environmental issues plays an important part in this. Whenever any service was contracted out, an important objective was to enable CSG to influ- ence environmentally-relevant decisions taken by the contractors concerned. The environ- mental standard of the outsourced services was to be maintained or improved. Through its contracts and agreements, CSG is still able to exert influence over environmental matters and its business partners benefit from CSG’s experience of environmental management. Reform of environmental organisation of CSG Within CSG, environmental activities are co-ordinated by the environmental management unit. Focal points include maintaining an Environmental Management System eligible for certification through the use of environmental controlling and environmental performance evaluations and internal and external communica- tion by means of environmental reports and the drafting of statements. Specific technical re- sponsibility and the implementation of environmental measures are largely matters for the various line and specialist units; a number of full-time specialists are employed both in the Environmental Risk Unit in the Credit Management area of Credit Suisse and in Winterthur’s environmental unit for third-party liability risk. CSG also has its own specialist units for en- ergy/building ecology, safety, operational ecology and ergonomics. In addition, in the fields of cleaning/waste disposal and catering, among other sectors, we can count on the specialists of the partner firms mentioned above. In a number of areas with an environmental impact, we can also turn to specific contact persons responsible for environmental issues. Environmental Report 1997/98 Credit Suisse Group Page 10
  11. 11. ENVIRONMENTAL MANAGEMENT PLANNING In the field of environmental investment, which is of increasing interest and at the same time complex, CSG can rely on close co-operation with the Zurich-based company Sustainable Asset Management AG. The whole environmental sector is controlled by the Environmental Executive Board, which handles strategic and business policy tasks. Chaired by CSG’s Environmental Officer, the Environmental Executive Board includes representatives from all business units and from the Environmental Management unit. Shift in important environmental aspects For a long time, environmental protection was only regulated by laws and binding technical provisions. This meant that companies’ ac- tivities were confined to eliminating and alleviating environmental effects after the event. Ac- cordingly, environmental measures were mainly aimed at areas of operational ecology such as saving energy or reducing waste. To promote sustainable development, the approach should be targeted at the causes of the environmental effects. As a result of the growing environ- mental awareness of stakeholders (investors, shareholders, NGOs), the focus is now also on the indirect environmental impact of products. However, if environmental issues are to be given the consideration they deserve, comprehensive environmental management is essential. Thus, over the past few years, the main focus of environmental concern among providers of financial services has shifted to ecological risks, particularly in the third-party liability and prop- erty insurance business and in the credit sector. The more recent widening of this focus to include product ecology has also affected the investment sector, encouraging the emergence of niche products. This has been reinforced by increased communication with our stakeholders on environmental issues. Objectives and specific targets In line with the structure of this environmental report, our objectives and individual targets have been subdivided into EMS, product ecology, opera- tional ecology and communications targets. In each case, the concrete targets are listed in the insets enumerating strengths, weaknesses and near-term objectives. Environmental Report 1997/98 Credit Suisse Group Page 11
  12. 12. ENVIRONMENTAL MANAGEMENT PLANNING Operative areas and partners of Credit Suisse Group The chart below shows: in which business unit the co-ordination unit for the whole group is situated n which environmentally-relevant specialist or line units with specialist responsibilty exist in n the different business units and who they work for in addition which partners and contractors with a high level of environmental relevance have their own n environmental units and which business unit is responsible for this third-party-relationship Environmental Report 1997/98 Credit Suisse Group Page 12
  13. 13. ENVIRONMENTAL MANAGEMENT IMPLEMENTATION 3 Implementation Putting environmental policy into practice In implementing environmental manage- ment measures, CSG intends to adhere to the environmental policy obligations it has as- sumed. Components of the implementation phase include: Environmental controlling n Environmental standards n Training of personnel n Environmental report n Implementing environmental policy is the task of the Environmental Management unit of CSG. CSG’s Environmental Management System is modular in structure. For a number of years, CSG’s environmental commitment has been pursued in accordance with ISO stand- ards. In the following, we enumerate the principal milestones in this process. To highlight the implementation of our environmental policy more effectively, we have assigned the individual milestones to the components of environmental policy. Environmental controlling As an important process in our Environmental Management System, environmental controlling involves systematically planning, recording, controlling and monitoring CSG’s impact on the environment. With a view to fulfilling our environmental tar- gets, over 100 measures have been defined for 1997/98. In addition, environmental controlling has been extended to include product ecology. Environmental standards We depend on the active support of our staff to ensure that CSG continues to improve its environmental performance. Since 1995, environmental stand- ards have been distributed to provide staff with guidance on their environmental conduct both at work and in their private lives. Since autumn 1998, the new updated edition of practical tips is being issued to all employees in Switzerland in the form of a bookmark. Training of personnel The personnel concerned are provided with training in environ- mental matters by means of blocks of lectures on the environment as part of apprentice train- ing, seminars for university graduates and internal audits in environment-related areas. Per- sonnel with specialist responsibilities are offered practical basic and ongoing training (e.g. energy management and building ecology in property management). In the field of product ecology, the Environmental Risk unit provides credit specialists with special training in identi- fying environmental opportunities and risks. Environmental report This second environmental report follows on from our first publi- cation (1995/96 environmental report). In the current edition, the product ecology chapter forms the main focus for the first time. The structure of the report is based on the VfU (Asso- ciation for Environmental Management in Banks, Savings Banks and Insurance Companies) guide to environmental reporting for financial service providers. Environmental Report 1997/98 Credit Suisse Group Page 13
  14. 14. ENVIRONMENTAL MANAGEMENT MILESTONES ON THE WAY TO IMPLEMENTATION Year Milestones Aspect of environmental policy Implementation of environ. policy Banking and insurance products Communications and marketing Infrastructure and facilities Production and operations HR and organisation Management 1976-79 Planning and construction of the Uetlihof in Zurich: pioneering decisions in # ## terms of thermal insulation, environmentally-friendly construction, furniture, and eco-planting of buildings and environs; repositioning of train and tram stops for more convenient use of public transport. # ## 1977 Launch of ten-year energy-saving programme throughout Switzerland, featur- ing action to remedy areas of high energy consumption, energy competitions and janitor training. By 1989, specific heat consumption per m² had been cut by 33%. Institutionalisation of energy accounting. 1989 Creation of post of full-time environmental officer. # # # 1990 Environmental protection becomes an explicit part of corporate philosophy # within the Credit Suisse guiding principles # Introduction of investment fund oriented towards environmental technology 1991 Formation of Credit Suisse & Environment Working Group, chaired by a # # # member of the Executive Board, underscores importance of environmental protection for Credit Suisse A further indication of the continuous improvement of environmental performance is the assignment of the individual milestones to the seven aspects of the environmental policy (see pages 8 and 9). The steadily increasing environmental commitment is also apparent from the growing number of crosses in the right-hand columns. This shows that we are actually implementing our environmental policy. Environmental Report 1997/98 Credit Suisse Group Page 14
  15. 15. ENVIRONMENTAL MANAGEMENT MILESTONES ON THE WAY TO IMPLEMENTATION Year Milestones Aspect of environmental policy Implementation of environ. policy Banking and insurance products Communications and marketing Infrastructure and facilities Production and operations HR and organisation Management 1992 Credit Suisse signs the International Chamber of Commerce Charter for long-term # ## # sustainable development (ICC Charter) and the UNEP Statement by Banks on the Environment and Sustainable Development First directive issued on lending business: environmental risks in lending # # ## 1993 Credit Suisse is awarded the City of Zurich’s Green Prize for the nature- # # ## compatible design of roofs, facades and environs at its Uetlihof site # # ## 1994 Establishment of Environmental Risk unit at Credit Suisse # # ## ## Establishment of Environmental unit at Winterthur # # # ## 1995 Environmental performance evaluations in Zurich and Geneva Executive Board approves environmental policy, energy guidelines and environ- # # ## ## # mental standards Signing of UNEP Statement by the Insurance Sector on the Environment and # ## # # Sustainable Development # # ## ## # 1996 Credit Suisse implements environmental controlling concept # # ## ## # Credit Suisse publishes 1995/96 environmental report 1997 Credit Suisse Group (banking sites in Switzerland) becomes the first major bank # # ## ## # to obtain ISO 14001 certification, documenting the introduction and application of an Environmental Management System conforming to the ISO 14001 standard. # ## # Repositioning of the Eco Efficiency environmental fund Contracts and agreements concluded with suppliers and service partners # # # ## # (MIB AG, IT Services, SV-Service and Mühlebach AG Logistic) # # ## ## # CSG merges with Winterthur 1998 1996/97 environmental performance evaluation of Credit Suisse Group Switzer- # # # ## # land (all banking sites) # # ## ## # First control audit passed # # # # Uetlihof receives award from Foundation for Nature and the Economy (Stiftung Natur und Wirtschaft) # # # ## # Revised environmental standards sent to all bank personnel of CSG Switzerland # # ## ## # Revision of environmental policy and environmental organisation # # ## ## # Credit Suisse publishes 1997/98 environmental report Environmental Report 1997/98 Credit Suisse Group Page 15
  16. 16. ENVIRONMENTAL MANAGEMENT MONITORING 4 Monitoring Our motivation in seeking certification An external inspection enhances the credibil- ity of our Environmental Management System and gives CSG the confirmation that it is oper- ating a functioning EMS. We see this as having the following advantages for us: CSG can be evaluated more simply and effectively by environmentally-oriented investors. n In terms of environmental management, CSG can position itself as a progressive provider n of financial services. Presentation of CSG as a company that is aware of its responsibilities gains credibility in n the eyes of the public and CSG personnel More detailed first-hand knowledge of the facts when performing credit analysis of certi- n fied corporate customers. The Executive Board of CSG has evidence to show that its own Environmental Manage- n ment System is performing effectively and efficiently. SGS-ICS [Société Générale de Surveillance – International Certification Services AG], a sub- sidiary of SGS, the world’s biggest testing, inspection and quality assurance organisation, was commissioned to carry out the inspection. Internal audits Over 25 sector-specific checklists were prepared for internal audits. In individual cases, external specialists were also brought in to carry out checks. Remedial measures are integrated in environmental controlling. Certification process The certification audit took place in April 1997. The focus was on the practical implementation of the environmental commitment on the part of the line organi- sation. The auditors questioned 50 key environmentally-relevant personnel at head office in Zurich (from environmental risk, personnel, training, communication, construction & real es- tate, computer centres, evaluation, procurement, maintenance and disposal of computer equipment, building management, waste disposal, transport/travel service, material purchas- ing and catering), in four regions (Geneva-Lancy, Berne-Murifeld, Basel and St. Gallen) and in certain branches (Uster and Wädenswil). The audit report produced by the certifying company (SGS-ICS) confirms the success of CSG’s environmental management. As well as bearing out the evidence of steady improve- ment, the report also lists remedial measures. The certificate is valid for three years providing that the annual monitoring audits are com- pleted successfully. The Group passed the first audit in June 1998. Environmental Report 1997/98 Credit Suisse Group Page 16
  17. 17. ENVIRONMENTAL MANAGEMENT BENEFITS Benefits of certified environmental management So far, certified environmental management has brought benefits to CSG in several areas: Areas of benefit Description of benefit Inclusion in environmentally-oriented portfolios Inclusion of CSG registered shares in environmentally-oriented portfolios n Competitive advantages Environmental performance is relevant as an additional indicator of successful n (commercial) corporate management and therefore shareholder value Cost savings Enhancement of environmentally-significant resource efficiency n Reduction in environmental impact and in costs caused by waste and emissions n Support in cost and revenue-oriented management of real estate portfolio n Recognition of potential for optimisation (e.g. videoconferencing instead n of air travel) Compliance with environmental legislation Systematic testing and monitoring procedures n Assurance of compliance with current and foreseeable environmental n legislation (legal compliance) Risk avoidance and reduction Systematic recording of all environmental risks associated with CSG’s business n activities Increasing the awareness of staff and training them in relation to high-risk n activities Credibility through external assessment External assessment of CSG’s Environmental Management System enhances n credibility Synergies External communication facilitated n Integration of EMS into higher-ranking management system promotes integration n of measures where crucial business processes are planned and controlled Environmental Report 1997/98 Credit Suisse Group Page 17
  18. 18. ENVIRONMENTAL MANAGEMENT COMMUNICATIONS Internal communications – supported by the Intranet CSG sets great store by internal communication. In addition to conventional channels such as the staff magazine and local notices, the Intranet is also becoming very important. Both the Environmental Manage- ment sector and various environmentally-oriented specialist units have their own homepages providing access to their services, missions, general information, checklists, publications, links to other important homepages, a glossary and contact addresses. Dialogue with our business partners CSG’s own experience with environmental man- agement makes it more competent in assessing the problems and implications of certification for other companies. Ideas and experience gained from its own Environmental Management System are passed on to interested, innovative companies. This exchange is targeted prima- rily at smaller and medium-sized companies. Publication series: Credit Suisse ‘Orientierung’ 106: issue 106 of this series of publica- n tions portrays comprehensive bases for establishing integrated management systems. This issue of the guide is primarily intended to assist small and medium-sized enterprises to establish their own management systems. It lists all necessary information on ISO standard models and total quality management, as well as specific instructions on how to establish a quality, environmental and occupational safety system. Customer events: CSG is eager to encourage its customers to embrace environmental n protection. For example, in December 1997 it organised a customer event in Berne on the topic of “environmental management systems”. Over fifty small and medium-sized companies were invited and provided with information on the various aspects of environ- mental management systems and ISO 14001. Environmental Report 1997/98 Credit Suisse Group Page 18
  19. 19. ENVIRONMENTAL MANAGEMENT FUTURE AND TRENDS Future and trends Validated environmental performance evaluations and certificated environmental management systems are increasingly important in assessing whether a company is best-in-class. Accord- ingly, central importance is attached to questions from environmentally-oriented investors concerning the introduction of environmental management systems and their possible certifi- cation, as well as management involvement and endorsement and questions concerning product ecology. The following aspects will become increasingly important: Highlighting the benefits of an EMS n Social compatibility – international standards are emerging in relation to this n issue (e.g. SA 8000). CSG is seeking to address this consideration through the intro- duction of integrated health management (comprehensive occupational medicine, health promotion, welfare counselling and ergonomics). David Nelson, President and CEO, EnviroSearch International, Salt Lake City, USA: “Sophisticated companies are now adopting environmental management systems as a crucial business manage- ment tool. Such companies understand the increasing pressure of regulatory regimes, international environmental agreements and treaties, shareholder demand, environmental organisations as well as public demand, requirements of development agencies, and new interna- tional environmental management stand- ards such as ISO 14000. The compa- nies who understand this increasingly diverse agenda and genuinely respond to these forces with sound management practices will benefit economically, so- cially and ethically.” Environmental Report 1997/98 Credit Suisse Group Page 19
  20. 20. PRODUCT ECOLOGY ENVIRONMENTAL ASPECTS OF SERVICES AND PRODUCTS In the field of environmental policy, we have committed ourselves to gradually incorporating the ‘environment’ factor into new and existing services and products. The main focus of our efforts in the field of product ecology is on risk management both in the context of granting credit and of providing third-party liability insurance cover. We see earn- ings potential and opportunities in the sector of environmentally-oriented financial investments and niche products. Eco-efficient commercial management leads to long-term success and is rewarded by the financial markets in the form of higher valuations. The growing number of environmentally-oriented investors bears witness to this. Ecology in the products sector Strengths CSG’s environmental activities in the products sector can be classified into credit business, Risk management in the context of n insurance business, investment business and new financial products (see table below). At the granting credits and of third-party same time, the classification may vary depending on how the area is viewed. For example, liability and property insurance the product WinCAT could be regarded as coming under the heading of investment business Two powerful special funds: Eco Effi- n rather than that of niche products. Moreover, the distinction between environmental risks and ciency (Lux) and Fellowship Trust investment business will inevitably be blurred since environmental risks are incontestably also (UK) playing an increasingly important role in this area of business. Open for innovative, environmentally- n oriented products, such as WinCAT and energy contracting Weaknesses Sector Business unit Product/Service Chapter Training and support material in in- n vestment business still too piecemeal Review of environmental risks and Lending business CS Credit checking and 1 Environmental risks n n real estate valuation opportunities in project financing so far not adequately systematised Energy contracting 3 Niche products n CSFB Project financing operations 1 Environmental risks n Next steps / objectives Insurance Winterthur Risk examination 1 Environmental risks n Greater sensitisation and information n WinCAT 3 Niche products n concerning products with an environ- EnviroWin 1 Environmental risks n mental impact Recycling of car components 3 Niche products n Structured procedure for assessing n environmental risks and opportunities Investment CSAM, CSPB, CS Eco Efficiency (Lux) 2 Investment business n in project financing business CSAM Fellowship Trust (UK) 2 Investment business n CSFB Listing of SPG shares 2 Investment business n Winterthur Unit-linked life policy 2 Investment business n of CS Life (see Eco Eff.) New financial CSFB Marketable 4 Future/trends n products emission certificates Financing of environmentally- 4 Future/trends n oriented products Environmental Report 1997/98 Credit Suisse Group Page 20
  21. 21. PRODUCT ECOLOGY INNOVATIONS Innovations in product ecology since the last environmental report Since the publication of the last environmental report (1996), our bank has witnessed a number of innovations. In 1997, the Environmental Technology equity fund introduced in 1990 was aligned on the concept of eco-efficiency and repositioned. More and more environmentally-oriented funds are emerging around the world (a volume of around 1 billion Swiss francs was invested in environmentally-oriented funds and investment foundations in Switzerland in 1998; this is equivalent to roughly half a percent of the total fund capital. In the United States, every tenth dollar is currently invested according to at least one ethical-environmental criterion [Bernadette Calonego, Der Standard, 23 March 1998]). In the UK, too, Credit Suisse Asset Management has been offering a successful ethical- environmental country fund since 1986. The fact that CSG is increasingly being considered for inclusion in portfolios of environmen- tally-oriented investors shows that its environmental performance is gaining recognition. In the niche products sector, a number of products have been developed that show potential, including WinCAT and Energy Contracting. 1 Environmental risks Companies that neglect environmental factors (such as environmental risks) may be putting Example illustrating their profitability or value at risk. For a company and its insurer or lending bank, it is therefore environmental risks important to be familiar with the facts and to respond to environmental risks as appropriately as possible. This not only enables the environmental impact to be reduced but also avoids A discarded cigarette causes a major costly remediation measures, depreciations and write-offs. Moreover, this area of activity also fire in the warehouse of a chemical opens up attractive commercial opportunities such as technical assistance in tackling con- factory. Because the warehouse floor taminated site remediation and the financing of such measures. is not sealed in accordance with regu- lations, toxic liquids seep into the soil while the fire is being extinguished. Environmental risks are business risks Environmental risks stem from a variety of After the fire, the site, which previ- causes. The cost of cleaning up a contaminated site can be enough to bankrupt a company. ously had an estimated value of So-called liability risks arise where the bank takes over the ownership of real estate, e.g. in 15 million Swiss francs, is only worth the context of bankruptcy proceedings. In Switzerland, if the bank owns the land, it is obliged 5 million Swiss francs. to pay for the clean-up. If the operating risk had been estab- Commercial risks relating to environmental factors arise where real estate or plant facilities lished by our specialist Environmental plummet in value as a result of environmental pollution or degradation. The causes could, for Risk unit when the loan was granted, example, lie in the incorrect storage of hazardous substances, an incident or a shift in public the company would have been alerted opinion or legal requirements. Risks to a company’s reputation, or risks arising from its links to the shortcomings in the warehouse. with an associated entity (i.e. where the bank’s reputation is compromised by its connections This could have prevented the liquids with a business partner responsible for environmental damage or through its representation from escaping and the resulting drop on the board of such a company) are currently becoming increasingly important. in the site’s value. Environmental risks are likely to be encountered in the following three areas of business: A Granting of loans and real estate ownership (Credit Suisse) B Project financing (Credit Suisse First Boston ) C Third-party liability and property insurance and real estate ownership (Winterthur) Environmental Report 1997/98 Credit Suisse Group Page 21
  22. 22. PRODUCT ECOLOGY ENVIRONMENTAL RISKS A Environmental risks associated with the granting of loans and with real estate business Credit Suisse only conducts business with corporate customers in Switzerland. Since 1992, it has been systematically analysing all loan applications (whether for new loans, extensions of existing loans, or increases in limits) for environmental risks. Here, Credit Suisse is also meet- ing an obligation assumed when it signed the UNEP statement. The procedure for examining credit risks can be found in the Annex on page 33. Environmental hazards inherited from the past can be an important factor not only in the field of loans but also in the valuation of real estate forming part of real estate funds. If there are any signs of danger, credit specialists enter into discussions with the customer to try to establish what environmental risks exist, what their extent is and whether they can be covered by insurance. To arrive at an assessment, our credit specialists consult both internal working instruments and the official land registry of sites where a contamination is suspected. The former identify vulnerable sectors and indicate which environmental risks in particular need to be taken into account. Where necessary, the specialist Environmental Risk unit assists our credit specialists in their evaluation and in recommending measures. In addition to this support function, the activities of Credit Suisse’s specialist Environmental Risk unit also include holding numerous internal and external training events. In recent years, the specialist unit has become more important. Consideration of environmen- tal risks has come to form an integral part of any credit check. In this way, we also create added value for many of our customers: in the context of the background documentation and information required for credit checks, environmental issues are systematically reviewed in order to pinpoint environmental risks at an early stage. If a problem arises, the bank is avail- able to the customer as a competent partner with contacts with specialists and the authori- ties. Facilitation of environmental assessment in the business sector Our own experience in environmental management puts us in a better position to assess the signifi- cance of a customer’s certification. Lending banks or insurers are concerned first and fore- most with environmental aspects that can become credit or insurance risks, with the market opportunities created representing an additional secondary interest. At present, however, the significance of certified EMS systems is difficult to assess in terms of the impact of environmental management on the balance sheet and earnings situation. For example, the fact that a company holds a certificate does not give any indication of its envi- ronmental performance. Furthermore, issues relating to the choice of site and process, liabil- ity risks, the extent of insurance cover, safety at work and contaminated sites are not primary considerations in certification. Nonetheless, from the bank’s vantage point, a customer with an EMS certificate does have a number of advantages: The environmentally-relevant information has been obtained and the environmental aware- n ness of the company’s management has greater credibility Use of innovative and progressive management instruments n Particularly in environmentally-vulnerable industries, in which environmental risks account n for a large proportion of financial risks, a bank knows that the company is meeting its en- vironmental responsibilities, is aware of its risks and intends to deal with them on a profes- sional basis. Environmental Report 1997/98 Credit Suisse Group Page 22
  23. 23. PRODUCT ECOLOGY ENVIRONMENTAL RISKS However, for the lending bank the decisive factor is always the overall perspective in terms of risks and opportunities. After all, when granting a loan, it is not so much the borrower that is assessed, but the loan and its general conditions. Certification makes it easier for the bank to examine environmental risks relating to the cus- tomer since specific environmentally-relevant information, validated by the certification, is al- ready available and the persons responsible for environmental matters are named. However, certification does not replace verification. Even where a certificate is held, Credit Suisse al- ways checks loan applications for environmental risks. B Environmental risks relating to project financing Environmental risks may also arise in connection with project financing. This mainly affects Credit Suisse First Boston in its role as a financing partner. In most cases the financing is undertaken with other banks acting jointly with the World Bank; in examining the risks, their environmental standards are applied accordingly. For CSG, the assessment of the borrower’s quality continues to play a central part in the fi- nancing of projects. However, environmental considerations can affect that quality. CSG realises that environmental risks are becoming increasingly important in assessing credit quality. Such risks may have a legal or a “political” basis: Legal factors relate to the site and operation: e.g. environmental liability. n “Political” factors may arise from public opposition. These environmental risks can have a n significant adverse impact on project earnings, real estate values, the project timetable and the lender’s equity. The following instruments are used to avoid such risks, depending on the project: due dili- gence checks, enquiries to clarify the legal context and insurance cover. In international business Credit Suisse First Boston consults external specialists, where nec- essary, to enable it to tailor its response to differing operating conditions and legal frame- works in the countries in question. We are working on more systematic ways of recording, assessing and weighting these very specific risks in the future. C Environmental risks in third-party liability and property insurance and in relation to real estate business The environmental issue affects virtually the entire range of insurance products offered by Winterthur. Thus, cover components in which environmental factors play a part are to be found in the comprehensive motor vehicle insurance sector (e.g. hail damage), in the building or property insurance sector (for example storm damage, cover for clean-up and decontami- nation costs), in company and product liability insurance (cover for personal injury and dam- age to property and for damage prevention costs resulting from environmental degradation) and in compulsory liability insurance for subsidiaries (exclusion of losses resulting from envi- ronmental degradation). Natural disasters and global climate change Winterthur is expecting the property insurance sector to be particularly severely affected by global climate changes. It is therefore recording its risk exposure in this area on a targeted basis by calculating claims forecasts for various disaster scenarios on the basis of portfolio analyses. Winterthur uses the results of such studies to review and adjust its underwriting policy. Environmental Report 1997/98 Credit Suisse Group Page 23
  24. 24. PRODUCT ECOLOGY ENVIRONMENTAL RISKS One of Winterthur’s main interests lies in overcoming the consequences of natural disasters from a technical underwriting point of view. However, it would also like to gain a better understanding of the climatic context and of the repercussions of human activities on the cli- mate. In this context, Winterthur is not only interested in current environmental factors, but also attempts, on the basis of the data collected and with the aid of models, to anticipate what the environment might be like in the future. Even today, the biggest insured losses are already attributable to climate events. However, if non-insured losses are also taken into account, earthquakes exact the heaviest economic toll. For example, the property damage caused by the Kobe earthquake in Japan is estimated at USD 100 billion. Losses totalling around USD 2.5 billion were insured. As an insurance company with global operations, Winterthur bears a proportion of such losses. The cost of the losses in each case depends on the value of the property insured (i.e. risks) in the area affected. Event Date Country Loss in USD bn 24.8.92 USA 15.5 Hurricane Andrew n 7.1.94 USA 12.5 Northridge earthquake n 27.9.91 Japan 5.2 Typhoon Mireille n 25.1.90 Europe 4.6 Winter gale Daria n 5.9.89 USA 4.1 Hurricane Hugo n 25.2.90 Europe 3.2 Winter gale Vivian n 17.1.95 Japan 2.5 Kobe earthquake n 4.10.95 USA 2.1 Hurricane Opal n 10.3.93 USA 1.8 Winter gale Fridolin n 20.10.91 USA 1.7 Oakland forest fire n The ten biggest natural disasters in terms of losses to the insurance industry. Looking ahead to the future, Winterthur must focus on what changes might occur and where. In many parts of the world, civilisation has advanced into areas previously considered unin- habitable. They have been rendered habitable by the construction of protective structures and infrastructure facilities such as dams, drainage systems, avalanche barriers, power lines etc., which are all designed to cope with current known climatic conditions in the regions con- cerned. We can expect any shift in climate zone boundaries to increase the climate strain on some of these structures and reduce it on others. Overall, there are likely to be more cases in which structures are subjected to greater strain; this will mean an increase in the number of claims, which will in turn increase the claims burden on insurers. Efforts by the insurance industry to raise public awareness and highlight the possible connec- tions represents an initial step towards avoiding future problems. In addition to publications on this subject, the presentation of initiatives and policy documents at international conferences on the environment and climate change (as held in Kyoto or Geneva) represents a contribu- tion on the part of the insurance industry to making the (adverse) effects of human activity on the environment less ecologically damaging in the future. Environmental Report 1997/98 Credit Suisse Group Page 24
  25. 25. PRODUCT ECOLOGY RISK MANAGEMENT IN THE ENVIRONMENTAL SECTOR Risk management in the environmental sector – environmental liability The environmental aspects of the insurance products referred to above and of other insurance products not only compel Winterthur to pay close attention to natural events and environmen- tal risks, but also to advise its customers before and above all after they take out their poli- cies. When calling on customers, (environmental) engineers discuss a wide range of environ- mental aspects, highlighting weak points and risks. Thus, by establishing a link between environmental considerations and insurance products, policyholders can be encouraged to behave in a more environmentally-friendly manner. How- ever, the insurance industry does not see itself as an environmental police force, but rather as the partner of private individuals, trade and industry. Accordingly, in risk-prone, environmen- tally-sensitive areas, e.g. risks affecting landfill sites, Winterthur attempts to find solutions that go beyond classic insurance cover (risk transfer). Since 1994, Winterthur has had access to the Environmental Unit (part of Winterthur Risk Engineering since 1 January 1998), a unit involved in a wide range of tasks relating to prod- uct development, underwriting support in connection with environmental risks and the devel- opment of tools for assessing such risks. The unit also advises the claims departments in the event of new or serious forms of environmental damage. In addition, it assists the business units in providing training on environmental issues and conducts PR work in the form of lec- tures and publications. However, apart from the Environmental Unit, Winterthur also has other units concerned with environmental issues. One of these is Group Risk Management, which addresses such questions as the global climate problems referred to in our opening remarks. As explained above, the insurance industry has already been taking the subject of environ- mental liability seriously for many years. Winterthur has risen to the challenge and, in this actuarially-sensitive area, has devised a solution - the EnviroWin concept - that gives the cus- tomer insurance cover over and above the standard market coverage while keeping Winterthur’s risk at a reasonable level. One of the key features of this environmental liability product is insurance cover for environmental damage resulting from normal operations which could not have been foreseen given current state-of-the-art in technology and science. Such cover is only provided if the customer takes the necessary preventive safety measures. Instruments for assessing and evaluating environmental risks form the second key feature of the concept. Among these instruments, which have been developed by Winterthur itself, the EnviroWin Index takes pride of place. Using this index, the customer is given an initial envi- ronmental risk rating based on sector-specific risk characteristics. If the index indicates heightened risks, a “risk dialogue” is initiated. On a confidential basis, engineers and scien- tists from Winterthur analyse and evaluate environmentally-relevant information which the customer furnishes by completing a questionnaire. Where appropriate, an inspection is carried out on site. In the course of this risk dialogue, Winterthur also proposes measures to improve the situation and indicates how such measures would affect premiums. Environmental Report 1997/98 Credit Suisse Group Page 25