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Where Banks Are (and Aren’t) Hitting SRI Targets

An analysis of major European banks has found shortfalls on sustainability practices

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  • Written by  Banking Exchange staff
Where Banks Are (and Aren’t) Hitting SRI Targets

Many banks are working towards integrating sustainability themes into their operations but most still have some way to go be considered industry leaders, according to a new analysis by French consultancy group Mazars.

The company analyzed 30 major banks – 26 of which were European – for their work and reporting on environmental, social and governance (ESG) criteria.

Mazars’ assessment split banks into four categories: ‘outstanding’ – those that demonstrated best practice – ‘leaders’, ‘supporters’ and ‘followers’.

None of the banks Mazars analyzed were rated as outstanding and just three were ranked as leaders, based on a study of their culture, governance, risk management, reporting standards, products and services, and initiatives and targets.

While many reported that they were “working towards embedding sustainability targets”, these claims were not always reflected in their strategy or policy documents, Mazars found.

The consultancy recommended that responsibility for sustainability policies and reporting should be allocated to a board-level committee to ensure such considerations are incorporated into bank strategies. It also called for banks to consistently report on ‘SMART’ targets – those that are Specific, Measurable, Achievable, Relevant and Time-bound.

Boards could also consider an element of incentivization for hitting sustainability targets, including financial incentives.

Mazars also urged banks to consider offering products that address socio-economic issues rather than just climate change or environmental themed products. All 30 of the banks in Mazars’ sample offered “environmentally responsible” products, but far fewer proposed “socially responsible lending and savings”.

“Covid-19 has reaffirmed the positive role the banking sector can play by working with governments and regulators to keep the economy going,” said Leila Kamdem-Fotso, financial services partner at Mazars and one of the authors of the report.

“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.”

Banks rated higher by Mazars’ analysis tended to use more than one voluntary ESG or reporting standard. Among those used were the Global Reporting Initiative, guidance from the Sustainability Accounting Standards Board, and recommendations from the Task Force for Climate-Related Financial Disclosures.

While only one US-based bank – Citi – was involved in the analysis, Mazars also surveyed European banks with significant US presence, including Barclays, BNP Paribas, Deutsche Bank, Santander and UBS.

Mazars’ full report is available here.

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