GUIDE TO EDITION 2 DISCLAIMER COPYRIGHT The designations employed and the presentation of the material Copyright © in this publication do not imply the expression of any opinion United Nations Environment Programme, October 2016 whatsoever on the part of the United Nations Environment Programme concerning the legal status of any country, territory, This publication may be reproduced in whole or in part and in city or area or of its authorities, or concerning delimitation of any form for educational or non-profit purposes without special its frontiers or boundaries. Moreover, the views expressed do permission from the copyright holder, provided acknowledge- not necessarily represent the decision or the stated policy of the ment of the source is made. UNEP would appreciate receiving United Nations Environment Programme, nor does citing of a copy of any publication that uses this publication as a source. trade names or commercial processes constitute endorsement. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the United Nations Environment Programme. GUIDE TO BANKING AND SUSTAINABILITY EDITION 2 ACKNOWLEDGEMENTS The Guide to Banking and Sustainability is an initiative of We would like to thank all of them for their valuable time, guid- UNEP FI’s Banking Commission Board. Its development ance and contributions. has involved extensive input from both the Board and other members of the Banking Commission. UNEP FI Banking Commission Board Paul Blagbrough Denise Hills Director of Environmental Stewardship, Head of Sustainability and Inclusive Business, MUFG Americas, US Itaú Unibanco, Brazil Rosemary Bissett Leonie Schreve Head of Sustainability Governance & Risk, Global Head Sustainable Lending, National Australia Bank, Australia ING, Netherlands Christopher Bray Madeleine Ronquest Head of Environmental Risk Management, Head of Environmental and Social Risk, FirstRand Limited, Barclays plc, UK South Africa Denis Childs James Vaccaro Head of Positive Impact Finance and Environmental and Head of Corporate Strategy, Triodos Bank NV, Netherlands Social Advisory, Sociéte Générale CIB, France Namita Vikas Guido Cordero Senior President and Country Head- Responsible Banking & Corporate Executive Vice-president, Chief Sustainability Officer, YES BANK LTD, India Banco Pichincha, Ecuador Wendy Dobson Head of Group Policy, Advocacy and Sustainability in Group Risk, Standard Bank, South Africa Co-authors Careen Abb Susan Miller Banking Programme Lead, UNEP FI Independant Consultant UNEP FI Project Team Teresa Hartman Elisa Vacherand Consultant Consultant Soomin Kim Aki Tomoda Intern Intern I - UNEP FINANCE INITIATIVE FOREWORD 2016 is a timely year to release the 2nd edition of UNEP Through these pages three key messages emerge on what Finance Initiative’s Guide to Banking and Sustainability. defines a sustainable bank: With the establishment of the G20 Green Finance Study Group, ◼ First, addressing sustainability issues requires responsibili- financial policy-makers have for the first time been collectively ties and actions to be taken at all levels and across all the key engaged on the role of finance in relation to environmental and functions of banks. broader sustainability issues. ◼ Second, a sustainable bank is one that not only understands and manages the risks that arise because of sustainability Banking supervisors and regulators have also demonstrated issues, but also perceives the strategic dimension of these growing awareness of the materiality of sustainability issues, issues. This means thinking ahead about business implications as shown by the establishment of the Financial Stability Board and opportunities brought by the increasingly pervasive envi- Task Force on Climate-related Financial Disclosures. ronmental, social and developmental challenges of our time. At the same time, the banking sector’s engagement in sustaina- ◼ Third, communicating and engaging, - within the bank, with bility issues has reached a new phase as the rapid growth of the peers and with stakeholders - is critical to embracing some- green bonds market has drawn the business teams of numerous thing as complex and as vital as sustainability issues. banks closer to the agenda. On the eve of its 25th anniversary, the UNEP Finance Initiative It is therefore more timely than ever to find answers to the ques- is proud to release this Guide to Banking and Sustainability. It is tion “What does a sustainable bank look like?”. This is precisely our hope that it will provide veterans and newcomers alike with the question that this Guide seeks to address. By opting for a a helpful tool to understand, fulfill and communicate their role hands-on, practitioner-oriented format we have sought, once in making the world more sustainable. more, to prioritise action over theory. Addressing sustainability Eric Usher issues requires responsibilities Head, UNEP FI and actions to be taken at all levels and across all the Christopher Bray key functions of banks. Chair, UNEP FI Banking Commission Head of Environmental Risk Management, Barclays plc, UK GUIDE TO BANKING AND SUSTAINABILITY - II ABOUT THIS GUIDE AND HOW TO USE IT What is the Guide to Banking and Sustainability? Working definitions for the The Guide to Banking and Sustainability (“Guide”) is a high- purposes of this Guide level, functional overview of what a sustainable bank looks like from inside and to the outside. Sustainability: “Sustainability” encompasses the business role in balancing environmental and social Who and what is it meant for? (human rights and labour) issues and to a lesser degree for the Guide, economic issues. The Guide is first and foremost a tool for banking practitioners Sustainable Development: Development that themselves. It is meant as an awareness-raising, integration and meets the needs of the present without compromis- outreach tool for: ing the ability of future generations to meet their own needs (Our Common Future, The Brundtland ◼ Senior management and board members seeking to educate Commission, 1987). themselves and their employees on banking and sustainability ◼ Sustainability teams seeking to engage employees across the bank ◼ Employees seeking to understand the relevance of sustaina- What’s inside? bility issues to their work ◼ Employees who are engaging with external shareholders and The Guide is organized into nine functional chapters, spanning stakeholders on sustainability expectations, risks, inquiries, from leadership all the way through to sustainability teams, risk and other matters teams and client-facing teams. It will also be a useful tool for a number of stakeholders, including: Each chapter contains: ◼ Banking associations seeking to understand and promote ◼ The business case - why embark on a sustainability journey sustainability among their membership ◼ Guidance - how to go about it ◼ Banking regulators and supervisors interested in understand- ◼ Illustrations of current practice taken from UNEP FI ing and promoting banks’ roles in preserving the banking members institutions of different types and across the globe system’s safety and soundness vis-a-vis environmental and social risk drivers In addition, the Guide contains useful features such as: ◼ Anyone from the policy-making sphere to civil society, to the corporate sector and the general public who is interested in ◼ An extensive resources section understanding how the worlds of banking and sustainability ◼ A specialized glossary are connected in practice ◼ A list of common abbreviations III - UNEP FINANCE INITIATIVE TABLE OF CONTENTS Chapter VI: i Acknowledgements 53 Retail Banking Chapter VII: ii Foreword 63 Communications About this Guide Chapter VIII: iii and How to Use It 73 Human Resources Chapter I: Chapter IX: 01 Leadership 81 General Services UNEP Statement of Commitment by Financial Chapter II: Institutions (FI) on 11 Sustainability 91 Sustainable Development Chapter III: End notes & 23 Risk 93 Abbreviations Chapter IV: Appendix: 35 Legal 97 Resources Chapter V: Appendix: Corporate Banking Glossary 41 11 2GUIDE TO BANKING AND SUSTAINABILITY - IV V - UNEP FINANCE INITIATIVE CHAPTER I: LEADERSHIP LEADERSHIP GUIDE TO BANKING AND SUSTAINABILITY - VI "Commitment to Sustainability Development CHAPTER I: 1.1 We regard sustainable develop- ment - defined as development LEADERSHIP that meets the needs of the present without compromising the ability of future generations This section is intended for those with a senior leadership role to meet their own needs - as within the bank. This includes the board of directors, executive a fundamental aspect of sound committee, the chief officers, upper management and their advi- business management. sors who provide day-to-day senior leadership and direction. 1.4 We recognize that sustainable development is an institutional commitment and an integral “We concentrate on the key issues that most part of our pursuit of both good affect our stakeholders and us, but also those corporate citizenship and the over which we have a direct influence and fundamentals of sound business for which there is a sound business case. practices." Sustainability is a way that helps us generate revenue, cut costs, attract talent and Statement of Commitment future-proof our business. We also see by Financial Institutions on sustainability as a source of competitive Sustainable Development advantage. We can help facilitate the transition to a fairer, greener economy by financing projects that accelerate