29th July 2020 – Mazars, the international audit and advisory firm, shares global assessment of how banks are embedding sustainability into their commercial practices. The findings show that environmental, social and governance criteria (ESG) are not yet fully integrated into banks’ strategies and advise that more responsible banking practices can be achieved if banks make the criteria part of their risk management frameworks and measure this more effectively.

Presented in the report ‘Responsible banking practices: benchmark study 2020’, the findings reveal just three out of the 30 banks assessed demonstrate best practice across a wide range of sustainability factors, with ten banks showing a sustainable approach across some factors and more than half (17) of banks showing limited evidence of a sustainable approach across most factors.

After assessing banks including Barclays, BBVA, Citi, Credit Suisse, Santander and UBS, Mazars found no banks to be ‘outstanding’ – a scoring reserved for banks with a positive score in more than 90% of the criteria. Benchmark criteria included culture and governance, risk management, reporting, targets and more.

The report comes at a time when banks are reflecting on their purpose and values as the rise of social movements reshape how financial actors ensure what they invest in is not just environmentally sustainable but also socially inclusive.

Leila Kamdem-Fotso, Partner at Mazars, says, “Covid-19 has reaffirmed the positive role the banking sector can play by working with governments and regulators to keep the economy going. 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.”

Virginie Mennesson, Head of Regulatory Affairs at Mazars in the UK, says, “Policy makers are looking to the banking sector to play a key role in the recovery effort post Covid-19. In Europe, they see a robust recovery as one which promotes green and sustainable investments in the long-term to ensure a fair and resilient future for all. Our findings show that a handful of banks are leading the way, with most still having some work to do to fully embed ESG factors in their corporate strategy, governance and risk management frameworks”.

Banks starting to focus on socio-economic issues

The benchmark finds most banks have adopted or are implementing voluntary ESG reporting standards but the majority (57%) have yet to fully integrate ESG factors into their Risk Management Framework using both qualitative and quantitative approaches.

Similarly, most banks support sustainability frameworks and have launched corporate social responsibility programmes but the definition and disclosure of sustainability targets is not yet common practice. And while all banks assessed offer environmentally responsible products, only 43% of them have developed a product offering that fully addresses socio-economic issues.

Targets and incentives

The benchmark report finds that the introduction of explicit targets could help banks increase their ESG achievements. Only 27% have set specific and measurable socio-economic targets in line with sustainability frameworks. On the other hand, just 13% of the banks assessed have sustainability-related financial incentives for the board and top management.

A broader range of commitments

The report cites recent examples of banks ensuring they meet societal goals. For example, Barclays is working to embed human rights considerations into its client due diligence process. Also, Citi will develop an environmental and social action plan as a condition of financing when there are gaps between international standards and a client’s environmental and social practices. The report also references Goldman Sachs (which was not one of the banks assessed) and who will now only advise companies on IPOs where there is at least one diverse board member as an example of increasing action on diversity.