By Danielle Pamela Neben, Editor of NFI and Marketing Director at ePassi in Iceland.
Banks are a critical engine of the economy. They have a direct and indirect impact on the sustainability of our planet earth through their various portfolios.
We had excellent presentations at the NFI Women Event in Dublin on how banks can actively take part in making a real difference, with two highlighted in this article. Time is short. It is not a question of when, but how we can act now.
UNEP Finance Initiatives: Principles for Responsible Banking
Puleng Ndjwili-Potele, Banking Project Coordinator at the UN Environment Finance Initiative
The Principles for Responsible Banking aim to transform the banking industry to enable it to play a leading role in achieving society’s goals as expressed in the Sustainable Development Goals and the Paris Climate Agreement.
Starting with 30 founding members, there is now a strong international banking network of over 130 leading banks across the world. In the Nordics, we are pleased to see these 12 banks having signed the Principles for Responsible Banking.
Arion Bank, Iceland
Danske Bank, Denmark
Nordea, Sweden (Founding Member)
Norges Bank Investment Management, Norway
How does it work?
There are six principles that make up a comprehensive framework for all of the banks. Each bank can adapt depending on where it is on its sustainable journey. There is a baseline determined for each bank and how they can develop scenarios.
Alignment: Banks will canvas main needs and goals in their country of operation.
Impact and target setting: Banks will identify key sectors and where they are a significant player in financing and investments. They choose areas of impact and set SMART objectives: specific, measurable, achievable, relevant and time based.
Clients and customers: If a bank is going to work with its clients, the bank needs to do an introspection and live to those aspirations. This is a journey to work with customers, not just divest and put the problem elsewhere. They will help develop new technologies, products and services. It is key to treat customers fairly. This is embedded in the bank’s culture.
Stakeholders: Banks are part of an ecosystem. They need to learn how to set targets, with impact, understand customers’ needs on the ground, get input from thinktanks, regulators, fintechs and various experts for different learnings.
Governance and culture: Banks need buy in at the CEO level and develop a culture throughout the organisation. Staff need to know “what do I need to do to feed into the sustainability strategy”.
Transparency and accountability: Any bank that signs up, they have a commitment statement. There is a reporting and self-assessment template annually. Report on targets, risks and how you are managing and mitigating your risks. No need to develop a new report. You can have in integrated reporting or current sustainability report. Banks have up to 4 years to fully implement commitments.
In Africa, there is a huge need to electrify communities to implement security with positive outcomes. But then you do this with coal and is quite a major negative impact. Banks need to be cognisant of the negative impact and to mitigate those. Communicating with governments and explaining the need to move away from coal generation to cleaner technologies is key. This needs to be addressed through this policies. And that investors make decisions on these policies.
Here are considerations post this event for all NFI members
For banks that are signed up, how is this made relevant for each employee? What cultural change and training is needed? How can we empower our employees to have impact? What HR KPIs are set for executives and employees to align them to these initiatives?
For banks not yet signed up, do you have the courage to introduce this to your organisation?
How can we work with Fintechs to include sustainability as part of their solutions?
How can Nordic Finance Innovation lead from the front to have impact?
For more information go to: https://www.unepfi.org/banking/banking/
Turning a tool for consumption into an instrument for nature
Anne-Maria Salonius, Director, Bank of Åland, Finland
Ålandsbanken is a small Finnish bank with 700 employees servicing 100.000 private and personal banking customers. Their vision is that we should all fit one one planet, with enough resources for the future.
What they have done with this project is exemplary.
The world´s first credit card measuring carbon footprint
In July 2016, they issued the world´s first credit card that counts the carbon footprint of transactions. This solution arose from their concerns that the Baltic Sea is one of the most polluted seas, and came up with this idea after getting feedback from employees and customers. This card is also a new type of biologically degradable credit card and can be easily recycled.
What gets measured gets managed
There exists many tools on the internet to measure carbon footprint. But this takes personal effort and interest. Ålandsbanken wanted everyone to have this possibility and to change consumer behaviour. They have mapped out 4.000 companies and impact from each industry with an index. People can see the impact they have on carbon footprint in their credit card statement.
And with this, consumers will be empowered to make better-informed decisions, with the opportunity to offset their carbon footprint and change behaviour.
Open to any bank
All other banks are invited to join and use the Åland Index through its cooperation with MasterCard. This is an excellent example of where innovation in banking crosses over with sustainability.
For more information and how to get your bank started, go to http://www.balticseaproject.org/en/