Transition to Sustainability

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
/>
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.
/>UNEP FI Guide to Banking & Sustainability

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Sustainability & Sustainable Development: Corporate Sustainability

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Sustainability & Sustainable Development: What is it about?

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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]

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Sustainability & Sustainable Development: Confusing?

ESG ?

Reporting ?
Green Economy ?

CSR ?

Business Ethics ?

Operational Footprint ?

Sustainability?
Risks ?

Citizenship ?

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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

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Sustainability & Banking: Simplified

Operational Footprint
Sustainability at the Office

Environmental/Quality/Health & Safety
Management Systems

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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
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Sustainability & Banking: Simplified
Operational Footprint
Sustainability at the Office

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Sustainability & Banking: Simplified

Sustainability at the Office
Products and Services
Green/Sustainable Portfolio

Environmental & Social Risk Management

Sustainability profiling, NGOs and volunteerism

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Sustainability & Banking: Simplified
Products and Services
Green/Sustainable Portfolio

UNEP FI Survey 2007
Home Mortgages

Retail Banking

Commercial Building Loans

Home Equity Loans

Auto & Fleet Loans

Credit & Debit Cards

Personal Accounts

Green Sale & Travel Money Products

Corporate &
Investment Banking

Asset Management

Project Finance

Securitization

Venture Capital & Private Equity
Carbon Commodity Products and Services

Fiscal Funds

Investment Funds

Carbon Funds

Cat Bond Funds

Auto Insurance

Insurance

Home & Business Insurance
Carbon Insurance

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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.

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Sustainability & Sustainable Development: Simplified

Sustainability at the Office

Green/Sustainable Portfolio

Risks and Liability
Environmental & Social Risk Management

NGOs and volunteerism

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Sustainability & Banking: Simplified
Risks and Liability
Environmental & Social Risk Management

Probably the most crucial and
challenging element of sustainable
banking and finance…

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Environmental Liability: What is it about? (1)
Internalisation of Environmental Externalities

The very basis of Environmental Economics Science
It is about “external” cost internalisation & allocation
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”

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Environmental Liability: What is it about?(2)
Prevention and Remediation
From fines to cost of prevention and remediation of Environmental Damage
Financial Security
Insurance Policies?
Other Financial Security Measures/Schemes
Environmental Risk Assessment & Management
Synthesis between Risk Assessment & Environmental Management
disciplines

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Environmental Liability & the Financial Sector
The Financial Sector

Institutional Investment
Institutions
Banks
Insurance
Companies
Banking Groups

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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
Professional service
partners

571

Total

Assets
under management

161
978

$30.000.000.000.000 (30 trillion$)


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Environmental Liability & the Financial Sector
Current trends in the industrialised world
Insurance Companies
Pollution and Environmental Liability products evolving
Insurers as Investors

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Environmental Liability & the Financial Sector
Current trends in the industrialised world
Banks
Multilateral/Development Banks
Commercial Banks

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Environmental Liability & the Financial Sector
Development Banks

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Environmental Liability & the Financial Sector
Development Banks

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Environmental Liability & the Financial Sector
Commercial Banks
Environmental Risk
Management in EU and
US Banks is NOT a
new concept

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Environmental Liability & the Financial Sector
Why Bother?
Risks
Financial Risks?
Legislation Risks?
Reputational Risks?

Opportunities

?

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