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Corporate Social Responsibility
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1.11.2008 - 09:49am ET
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HSBC, Other European Banks Receive Top Scores in First-Ever Ranking of 40 Leading Banks on Climate Change Strategies
Citigroup and Bank of America post Highest Scores Among 16 U.S. Banks
(CSRwire) BOSTON, MA - January 11, 2008 - While encouraging progress is being made,
the banking sector still has a long way to go in confronting the business
challenges posed by global climate change, according to a first-ever
report issued today by the Ceres investor coalition that analyzes climate
change governance practices of 40 of the world’s largest banks.
Banks and financial institutions, with nearly $6 trillion in market
capitalization, are a key player in combating the impacts of climate
change and supporting the investments necessary to move the world economy
on a pathway to reduced greenhouse gas emissions.
The report found that a growing number of European, U.S. banks and
Japanese banks are responding to the risks and opportunities presented by
climate change, primarily by setting internal greenhouse gas (GHG)
reduction targets, boosting climate-related equity research and elevating
lending and financing for clean energy projects. But many others are still
not addressing climate change and only a handful of the 40 banks have begun
integrating climate risks into their core business of lending by pricing
carbon into their finance decisions or setting targets to reduce GHG
emissions in their lending portfolios.
The shortcomings were evident in the report's final scores. Using a 1- to
100-point scoring system, the two highest scoring banks were
European-based HSBC Holdings and ABN AMRO with 70 points and 66 points,
respectively. More than half of the 40 banks scored under 50 points, with
a median score of 42 points.
"More banks realize that climate change is a big business issue, but their
responses so far are the tip of the iceberg of what is needed to tackle
this colossal global challenge," said Mindy S. Lubber, president of Ceres,
which published the report, Corporate Governance and Climate Change: The
Banking Sector. "As a key provider of capital and financing worldwide,
banks must do more to move the economy away from fossil fuels and
high-carbon investments that are exacerbating climate change."
The report employs a "Climate Change Governance Checklist" to evaluate how
16 U.S. and 24 non-U.S. banks are addressing climate change through board
of director oversight, management performance, public disclosure, GHG
emissions accounting and strategic planning. The report took six months to
complete and uses data from securities filings, company reports, company
websites, third-party questionnaires and direct company communications.
The report ranked 16 U.S., 15 European, five Asian, three Canadian and one
Brazilian bank. The 40 companies include several different classes of
financial services firms, including diversified banks, investment banks
and asset managers. The final scores are weighted to reflect the fact that
some of the banks – specifically, asset mangers and investment banks –
are not engaged in the full spectrum of product and service offerings
assessed by the Climate Change Governance Checklist. (Company scores,
profiles and the summary report are available at www.ceres.org.)
Among the key scores:
|
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| Bank Category | Highest Scorers |
Lowest Scorers | | Diversified Banks (20
Total) | HSBC(70 points) | Bank of Nova Scotia(26
points) | | ABN AMRO(66) | TD Bank
Financial(25) | | Barclays (61) | Mizuho
Financial (24) | | HBOS (61) | Banco Santander
(22) | | Deutsche (60) | Banco do Brasil
(14) | | Citigroup (59) | Industrial Bank of
China (8) | | Bank of America (56) | Bank of
China (4) | | Investment Banks (5 Total) | Goldman
Sachs (53) | Lehman Brothers (26) | | Merrill
Lynch (52) | Bear Stearns (0) | | Morgan
Stanley (49) | | | Asset Managers (6
Total) | State Street Corp (36) | Franklin Resources
(1) |
Leading institutional investors requested the Ceres report, authored by
RiskMetrics Group’s Climate Research Team, to boost understanding and
awareness about the banking sector’s role and response to climate
change. The investors are part of the Investor Network on Climate Risk
(INCR), an alliance of U.S. institutional investors coordinated by Ceres
that collectively manage more than $4 trillion in assets.
"Over the next 40 years, we're looking at the virtual de-carbonization of
industrial economies if the warnings of climate scientists are going to be
heeded," said lead author Douglas Cogan, director of Climate Change
Research at RiskMetrics Group. "Banks need to start re-ordering their
investment and lending priorities now, especially in the energy sector, to
reflect changing asset and credit valuations."
The five highest scoring banks were all based in Europe – HSBC, ABN
AMRO, Barclays, HBOS and Deutsche Bank – followed by Citigroup, Bank of
America and the Royal Bank of Scotland.
The report provides much evidence that many banks are responding to
climate change through equity research and new product offerings, with
European banks being in the forefront and many U.S. banks following
closely behind. Many of the positive actions have come in the past 12 to
18 months, especially in regard to disclosure, internal emissions
management and financial support for clean energy.
Among the highlights:
The banks have issued nearly 100 research reports on climate
change and related investment and regulatory strategies, more than half of
them in 2007 alone;
34 of the 40 banks responded to the latest climate-disclosure
annual survey conducted by the Carbon Disclosure Project, a nonprofit
group that seeks information on climate risks and opportunities from
companies on behalf of investors;
28 of the banks have calculated and disclosed their GHG
emissions from operations and 24 have set some set some type of internal
reduction target;
29 of the banks reported their financial support of alternative
energy, eight of which alone have provided more than $12 billion of direct
financing and investments in renewable energy and other clean energy
projects.
Yet for all of the positive momentum, many of the 40 banks have done
little or nothing to elevate climate change as a governance priority – a
trend that cuts across European, North American and Asian banks alike. For
example:
Only a dozen of the 40 banks have board-level involvement and all
but one of those firms are non-US-based;
Only a half-dozen banks say they are formally calculating carbon
risks in their loan portfolios, and only one of the 40 banks – Bank of
America – has announced a specific target to reduce greenhouse emissions
associated with the utility portion of its lending portfolio;
No bank has set a policy to avoid investments in carbon-intensive
projects such as conventional coal-fired power plants or Canadian tar
sands.
The report concludes that more action is needed to align the banking
sector with greenhouse gas reductions that scientists say are needed to
avoid the dangerous impacts of climate change. In this regard, the report
recommends that banks:
Elevate climate change as a governance priority for board
members and CEOs, especially at U.S. banks where direct board involvement
has been virtually non-existent;
Provide better disclosure about the financial and material risks
posed by climate change, their own emission reduction strategies, and
emissions resulting their financing and investment;
Explain how they are factoring carbon costs into their lending
decisions, especially for energy-intensive projects that pose financial
risks as carbon-reducing regulations take hold worldwide;
Set progressively higher targets to shrink the carbon footprint
of their lending and investment portfolios, and be more transparent about
they plan to meet these objectives.
Read: Corporate
Governance and Climate Change: The Banking Sector (pdf)
Bank Profiles: U.S.
Banks (pdf)
Canadian
Banks (pdf)
European
Banks (pdf)
Asia/Pacific
Island/Other Banks (pdf)
Listen
to the Press Conference here
About Ceres and INCR:
Ceres is a leading coalition of investors, environmental groups and other
public interest organizations working with companies to address
sustainability challenges such as climate change. Ceres direct the
Investor Network on Climate Risk (INCR), a network of 60 institutional
investors with collective assets totaling more than $4 trillion. For more
information, visit www.ceres.org and www.incr.com
About RiskMetrics Group:
RiskMetrics Group is a leading provider of risk management and corporate
governance products and services to financial market participants. By
bringing transparency, expertise and access to the financial markets,
RiskMetrics helps investors better understand and manage the risks
inherent in their financial portfolios. Our solutions address a broad
spectrum of risk across our clients' financial assets. Headquartered in
New York with 19 global offices, RiskMetrics serves some of the most
prestigious institutions and corporations worldwide. For more information,
visit: www.riskmetrics.com.
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