Responsible banking practices: greater integration of ESG factors needed according to benchmark study from Mazars
Benchmark assesses 30 banks on the integration of environmental, social and governance criteria into their commercial strategies and risk management frameworks.
- No banks assessed as “outstanding” on sustainability, but handful leading the way with innovative approaches that score highly against most scoring criteria.
- Limited evidence of a sustainable approach across most criteria for over half of banks sampled, with specific measurable targets not common practice yet.
- Banks focusing on environmentally responsible products but product offering yet to fully address socio-economic issues.
29 July 2020: Mazars, the international audit and advisory firm, shares global assessment of how banks are embedding sustainability into their commercial practices. The findings show that environmental, social and governance criteria (ESG) are not yet fully integrated into banks’ strategies and advise that more responsible banking practices can be achieved if banks make the criteria part of their risk management frameworks and measure this more effectively.
Presented in the report ‘Responsible banking practices: benchmark study 2020’, the findings reveal just three out of the 30 banks assessed demonstrate best practice across a wide range of sustainability factors, with ten banks showing a sustainable approach across some factors and more than half (17) of banks showing limited evidence of a sustainable approach across most factors.
After assessing banks including Barclays, BBVA, Citi, Credit Suisse, Santander and UBS, Mazars found no banks to be ‘outstanding’ – a scoring reserved for banks with a positive score in more than 90% of the criteria. Benchmark criteria included culture and governance, risk management, reporting, targets and more.
The report comes at a time when banks are reflecting on their purpose and values as the rise of social movements reshape how financial actors ensure what they invest in is not just environmentally sustainable but also socially inclusive.
Covid-19 has reaffirmed the positive role the banking sector can play by working with governments and regulators to keep the economy going. These findings should remind banks that the crisis is an opportunity to look beyond immediate priorities, re-assess their purpose and values and use some of the best practice outlined in our report to truly embed ESG factors in their decision-making on investments for the good of the business, their clients and society. Leila Kamdem-Fotso Partner - Financial Services
Policy makers are looking to the banking sector to play a key role in the recovery effort post Covid-19. In Europe, they see a robust recovery as one which promotes green and sustainable investments in the long-term to ensure a fair and resilient future for all. Our findings show that a handful of banks are leading the way, with most still having some work to do to fully embed ESG factors in their corporate strategy, governance and risk management frameworks Virginie Mennesson Head of Regulatory Affairs - FS Consulting
Banks starting to focus on socio-economic issues
The benchmark finds most banks have adopted or are implementing voluntary ESG reporting standards but the majority (57%) have yet to fully integrate ESG factors into their Risk Management Framework using both qualitative and quantitative approaches.
Similarly, most banks support sustainability frameworks and have launched corporate social responsibility programmes but the definition and disclosure of sustainability targets is not yet common practice. And while all banks assessed offer environmentally responsible products, only 43% of them have developed a product offering that fully addresses socio-economic issues.
Targets and incentives
The benchmark report finds that the introduction of explicit targets could help banks increase their ESG achievements. Only 27% have set specific and measurable socio-economic targets in line with sustainability frameworks. On the other hand, just 13% of the banks assessed have sustainability-related financial incentives for the board and top management.
A broader range of commitments
The report cites recent examples of banks ensuring they meet societal goals. For example, Barclays is working to embed human rights considerations into its client due diligence process. Also, Citi will develop an environmental and social action plan as a condition of financing when there are gaps between international standards and a client’s environmental and social practices. The report also references Goldman Sachs (which was not one of the banks assessed) and who will now only advise companies on IPOs where there is at least one diverse board member as an example of increasing action on diversity.
Lorraine Hackett, Global Brand and Communications Director, Mazars
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About the benchmark
The analysis is based on 30 banks’ publicly available information only (2018/2019 CSR and annual reports.) Mazars used an assessment matrix that covered: culture and governance; risk management; disclosure and reporting standards; frameworks, initiatives and targets and products and services. The analysis is focused on European banks, with the inclusion of some Southeast Asian, African and America banks for illustration purposes. The banks selected have demonstrated a significant interest in sustainability by participating in the UNEP FI initiatives and/or being signatories to the Principles for Responsible Banking. Banks assessed include Barclays, BBVA, Citi, Credit Suisse, Santander, Standard Chartered and UBS. For the full list, see the report here.
Mazars is an internationally integrated partnership, specialising in audit, accountancy, advisory, tax and legal services1. Operating in 91 countries and territories around the world, we draw on the expertise of 40,400 professionals – 24,400 in the Mazars integrated partnership and 16,000 via the Mazars North America Alliance - to assist clients of all sizes at every stage in their development.
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