Symposium
Marketing and social responsibility in banks
Belgrade, 11-12.04.2012
Transition to Sustainability
A snapshot of ...
2
Sustainability & Sustainable Development: Definitions
UNEP FI Guide to Banking & Sustainability
Sustainability
The Brund...
3
Sustainability & Sustainable Development: Corporate Sustainability
4
Sustainability & Sustainable Development: What is it about?
5
Sustainability & Sustainable Development
& The Green Economy
The financial sector can play a
critical role in the transf...
6
Sustainability & Sustainable Development: Confusing?
ESG ? Reporting ?
Green Economy ?
CSR ?
Business Ethics ? Operation...
7
Sustainability & Sustainable Development: Simplified
Operational Footprint
Products and Services
Risks and Liability
Spo...
8
Sustainability & Banking: Simplified
Operational Footprint
Sustainability at the Office
Environmental/Quality/Health & S...
9
Sustainability & Banking: Simplified
Operational Footprint
Sustainability at the Office
Procurement
Data Input Quality a...
10
Sustainability & Banking: Simplified
Operational Footprint
Sustainability at the Office
11
Sustainability & Banking: Simplified
Operational Footprint
Products and Services
Risks and Liability
Communications, Sp...
12
Sustainability & Banking: Simplified
Products and Services
Green/Sustainable Portfolio
UNEP FI Survey 2007
Home Mortgag...
13
Sustainability & Banking: Simplified
Products and Services
Green/Sustainable Portfolio
UNEP FI Survey 2007
Product
or s...
14
Sustainability & Sustainable Development: Simplified
Operational Footprint
Products and Services
Risks and Liability
Sp...
15
Sustainability & Banking: Simplified
Risks and Liability
Environmental & Social Risk Management
Probably the most cruci...
16
Environmental Liability: What is it about? (1)
The PPP
The famous “Polluter Pays” Principle
Already set out in the Trea...
17
Environmental Liability: What is it about?(2)
Prevention and Remediation
From fines to cost of prevention and remediati...
18
Environmental Liability & the Financial Sector
Institutional Investment Institutions
The Financial Sector
Banks
Insuran...
19
Environmental Liability & the Financial Sector
Current trends in the industrialised world
Institutional Investors
Growi...
20
Environmental Liability & the Financial Sector
Current trends in the industrialised world
Insurance Companies
Pollution...
21
Environmental Liability & the Financial Sector
Current trends in the industrialised world
Banks
Multilateral/Developmen...
22
Environmental Liability & the Financial Sector
Development Banks
23
Environmental Liability & the Financial Sector
Development Banks
24
Environmental Liability & the Financial Sector
Commercial Banks
Environmental Risk
Management in EU and
US Banks is NOT...
25
Environmental Liability & the Financial Sector
Why Bother?
Financial Risks?
Legislation Risks?
Reputational Risks?
Risk...
26
Environmental Liability & the Financial Sector
Commercial Banks
Why Bother?
Financial Risks
Legal Risks
Reputation Risk...
27
Environmental Liability & the Financial Sector
Commercial Banks
Why Bother?
Financial Risks
Legal Risks
Reputation Risk...
28
Environmental Liability & the Financial Sector
Commercial Banks
Why Bother?
Financial Risks
Legal Risks
Reputation Risk...
29
Environmental Liability & the Banking Sector
Incentives & Disincentives for Environmental Risk Management
Incentives Di...
30
Sustainability & Sustainable Development: Simplified
Operational Footprint
Products and Services
Risks and Liability
Sp...
31
Sustainability & Banking: Simplified
Communications, Sponsorships and Social Responsibility
Sustainability profiling, N...
32
Sustainability & Banking: Simplified
Communications, Sponsorships and Social Responsibility
Sustainability profiling, N...
33
Sustainability & Banking: How?
 Management Commitment
 Sustainability Management Systems
 Roles and Responsibilities...
34
Sustainability & Banking: How?
 Management Commitment
 Sustainability Management Systems
 Roles and Responsibilities...
35
Sustainability & Banking: How?
 Management Commitment
 Sustainability Management Systems
 Roles and Responsibilities...
36
Sustainability & Banking: How?
 Management Commitment
 Sustainability Management Systems
 Roles and Responsibilities...
37
Sustainability & Banking: How?
 Management Commitment
 Sustainability Management Systems
 Roles and Responsibilities...
38
Sustainability & Banking:
Reporting
Why ? (1)
(Socially) Responsible Investment [(S)RI] - Sustainable Investment (SI)
I...
39
Sustainability & Banking:
Reporting
Why ? (2)
(Source: European sustainable investment forum study EUROSIF 2010)
 Sust...
40
Key reasons why banks
consider sustainability issues
Increased credibility and gain in reputation
?
Demand by investors...
41
Transition to Sustainability
Sustainable Banks are definitely the Banks of the Future
Top Management Commitment
Integra...
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Transition to sustainability

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Serbian Bank Association Symposium
Marketing and social responsibility in banks

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Transition to sustainability

  1. 1. Symposium Marketing and social responsibility in banks Belgrade, 11-12.04.2012 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 © www.dimplex-resource.co.uk
  2. 2. 2 Sustainability & Sustainable Development: Definitions UNEP FI Guide to Banking & Sustainability 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 ESG 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. 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. United Nations Global Compact Who Cares Wins Series, 2004-2008 http://www.unglobalcompact.org/Issues/financial_markets/index.html Corporate Social Responsibility 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. 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. Corporate Citizenship 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. 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.
  3. 3. 3 Sustainability & Sustainable Development: Corporate Sustainability
  4. 4. 4 Sustainability & Sustainable Development: What is it about?
  5. 5. 5 Sustainability & Sustainable Development & The Green Economy 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] "Support for the green economy and the environment goes hand-in- hand 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) The Green Economy The Financial Sector…and
  6. 6. 6 Sustainability & Sustainable Development: Confusing? ESG ? Reporting ? Green Economy ? CSR ? Business Ethics ? Operational Footprint ? Sustainability? Risks ? Citizenship ?
  7. 7. 7 Sustainability & Sustainable Development: Simplified Operational Footprint Products and Services Risks and Liability Sponsorships and Social Responsibility Sustainability at the Office Green/Sustainable Portfolio Environmental & Social Risk Management NGOs and volunteerism
  8. 8. 8 Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office Environmental/Quality/Health & Safety Management Systems
  9. 9. 9 Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office Procurement Data Input Quality and Precision Use Savings Programme Top Spenders/Top savers Statistics: Building/Counter (in conjunction with CC allocations) Indicators Output GHG Emissions Reporting Indicators Energy Flow per source/per area/ per building/ per person Energy mix - Renewables Informed Decision Making Material Flow Management Market/Legislation Monitoring Benchmarking Opportunities -Offsetting -Carbon Neutral Bank Resource/Material Flow Analysis e.g. Energy
  10. 10. 10 Sustainability & Banking: Simplified Operational Footprint Sustainability at the Office
  11. 11. 11 Sustainability & Banking: Simplified Operational Footprint Products and Services Risks and Liability Communications, Sponsorships and Social Responsibility Sustainability at the Office Green/Sustainable Portfolio Environmental & Social Risk Management Sustainability profiling, NGOs and volunteerism
  12. 12. 12 Sustainability & Banking: Simplified Products and Services Green/Sustainable Portfolio UNEP FI Survey 2007 Home Mortgages Commercial Building Loans Home Equity Loans Auto & Fleet Loans Credit & Debit Cards Personal Accounts Green Sale & Travel Money Products Retail Banking Project Finance Securitization Venture Capital & Private Equity Carbon Commodity Products and Services Corporate & Investment Banking Fiscal Funds Investment Funds Carbon Funds Cat Bond Funds Asset Management Auto Insurance Home & Business Insurance Carbon Insurance Insurance
  13. 13. 13 Sustainability & Banking: Simplified Products and Services Green/Sustainable Portfolio UNEP FI Survey 2007 Product or service Model Banks Studied Region Key Product(s) and Results or Potential Lesson Learned Home Mortgage Dutch banks NL Government led „green mortgage‟ initiative. Homeowners and banks have not found the scheme particularly attractive. Product does demonstrate longevity, and has increased demand for green mortgages in the country. Banks and customers consider the maximum mortgage amount too low (€34,000) and selection criteria too stringent. Home Mortgage CFS UK Offers free home energy rating and offsets carbon emissions for every year of loan. During 2005, offset over 50,000 tonnes of CO2 emissions. Will soon launch added features into portfolio. Success. Significant environmental benefits. Customer loyalty and acquisition. First Mover Advantage. Potential to improve brand and reputation. CFS believes “eco home loans will become the norm in the future.” Home Mortgage Abbey, HBOS, Halifax and others Europe (UK) Green mortgages have only been announced by these banks, some of which are the largest mortgage providers in the country. UK Government announcement stimulated recent surge of interes in „green‟ mortgages. Align product design with stateled initiatives and commitments. Home Mortgage Bendigo Bank Australia Generation Green™ Home Loan. Success. Offered to both new and old homes, so those with existing mortgages can take advantage of discounted rates. Notable savings. All projects must exceed state requirements.
  14. 14. 14 Sustainability & Sustainable Development: Simplified Operational Footprint Products and Services Risks and Liability Sponsorships and Social Responsibility Sustainability at the Office Green/Sustainable Portfolio Environmental & Social Risk Management NGOs and volunteerism
  15. 15. 15 Sustainability & Banking: Simplified Risks and Liability Environmental & Social Risk Management Probably the most crucial and challenging element of sustainable banking and finance…
  16. 16. 16 Environmental Liability: What is it about? (1) The PPP The famous “Polluter Pays” Principle Already set out in the Treaty establishing the European Community (Article 174(2) TEC, now Article 191 of the Treaty of the Functioning of the EU) “Community policy on the environment shall aim at a high level of protection taking into account the diversity of situations in the various regions of the Community. It shall be based on the precautionary principle and on the principles that preventive action should be taken, that environmental damage should as a priority be rectified at source and that the polluter should pay” The very basis of Environmental Economics Science It is about “external” cost internalisation & allocation Internalisation of Environmental Externalities
  17. 17. 17 Environmental Liability: What is it about?(2) Prevention and Remediation From fines to cost of prevention and remediation of Environmental Damage Environmental Risk Assessment & Management Synthesis between Risk Assessment & Environmental Management disciplines Financial Security Insurance Policies? Other Financial Security Measures/Schemes
  18. 18. 18 Environmental Liability & the Financial Sector Institutional Investment Institutions The Financial Sector Banks Insurance Companies Banking Groups
  19. 19. 19 Environmental Liability & the Financial Sector Current trends in the industrialised world Institutional Investors Growing Attention and measures due to major environmental incidents Ethical, Socially Responsible, Sustainability, Green FUNDS Sustainability Indices (FTSE4Good, Dow Jones Sustainability Index) Voluntary Initiatives  Principles for Responsible Investment Number of signatories Asset owners 246 Investment managers 571 Professional service partners 161 Total 978 http://www.unpri.org Assets under management $30.000.000.000.000 (30 trillion$)
  20. 20. 20 Environmental Liability & the Financial Sector Current trends in the industrialised world Insurance Companies Pollution and Environmental Liability products evolving Insurers as Investors
  21. 21. 21 Environmental Liability & the Financial Sector Current trends in the industrialised world Banks Multilateral/Development Banks Commercial Banks
  22. 22. 22 Environmental Liability & the Financial Sector Development Banks
  23. 23. 23 Environmental Liability & the Financial Sector Development Banks
  24. 24. 24 Environmental Liability & the Financial Sector Commercial Banks Environmental Risk Management in EU and US Banks is NOT a new concept
  25. 25. 25 Environmental Liability & the Financial Sector Why Bother? Financial Risks? Legislation Risks? Reputational Risks? Risks Opportunities ?
  26. 26. 26 Environmental Liability & the Financial Sector Commercial Banks Why Bother? Financial Risks Legal Risks Reputation Risks Credit Cost of fines and/or remediation for environmental damage + product/brand/corporate reputational damage can impair customer's ability to pay back loans Collaterals Reduced value of assets Costs e.g. for waste removal or land decontamination
  27. 27. 27 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
  28. 28. 28 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
  29. 29. 29 Environmental Liability & the Banking Sector Incentives & Disincentives for Environmental Risk Management Incentives Disincentives Risk Identification & Management Customer Relationships Competition Compliance with Basel II Development of Green Products & Services Other Products (Insurance Policies Etc) Costs Customer Relationships Competition Potential Management Involvement Claims Lack of internal knowhow Unstable and incomprehensive regulatory regime
  30. 30. 30 Sustainability & Sustainable Development: Simplified Operational Footprint Products and Services Risks and Liability Sponsorships and Social Responsibility Sustainability at the Office Green/Sustainable Portfolio Environmental & Social Risk Management NGOs and volunteerism
  31. 31. 31 Sustainability & Banking: Simplified Communications, Sponsorships and Social Responsibility Sustainability profiling, NGOs and volunteerism
  32. 32. 32 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)
  33. 33. 33 Sustainability & Banking: How?  Management Commitment  Sustainability Management Systems  Roles and Responsibilities  Reporting
  34. 34. 34 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
  35. 35. 35 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
  36. 36. 36 Sustainability & Banking: How?  Management Commitment  Sustainability Management Systems  Roles and Responsibilities  Reporting http://www.unepfi.org/publications/banking/index.html
  37. 37. 37 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
  38. 38. 38 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.
  39. 39. 39 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.
  40. 40. 40 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 ? Sustainability & Banking: Why Bother?
  41. 41. 41 Transition to Sustainability 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 Key Messages

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