A banking sector evolving with a changing world

Éric Usher, Head of United Nations Environment Programme Finance Initiative (UNEP-FI)
Article featured in the Integrated Report 2022-2023

Attentive to supporting transformations currently underway whilst also taking into account the expectations of stakeholders and increasing reglementary change, banks have fully integrated the notions of responsibility and sustainability into their business models. If new practices, focused on the need for positive impact, are becoming more widespread, coherent action remains more than ever a key factor for success.

How has the concept of sustainability evolved in the banking industry?

The concept of sustainable finance has been around for many years. Since then, the relationship between the banking industry and the interests of wider society has come under intense scrutiny. Banks have recognised that in order to meet expectations from their customers, employees, regulators and wider society, they need to embed responsibility and sustainability across their activities. Over the past decade, the major crises of climate, nature loss, pollution and social issues have risen up the international policy agenda, from the 2015 Paris Climate Agreement to the recent Global Biodiversity Framework (COP 15), and global movements to further gender and racial equality.

What are the Principles for Responsible Banking and the Net-Zero Banking Alliance?

Launched in 2019, the Principles for Responsible Banking allow banks to be ambitious in their sustainability strategies, working to mainstream and embed sustainability into the heart of their business. Banks who have signed the Principles measure their environmental and social impact, set and implement targets where they have the most significant impact, and regularly report publicly on their progress. This is not about the impact of the banks’ operations, but rather the impact of the activities it finances. In addition to this, the Net-Zero Banking Alliance (NZBA), launched in April 2021, is the flagship climate initiative under the Principles for Responsible Banking to accelerate science-based climate target setting and develop common practice. The NZBA guidelines require banks to set 2030 and 2050 net-zero targets that align with no/ low-overshoot 1.5°C transition pathways. The Alliance supports banks by providing technical guidance, peer learning and capacity building on the development of net-zero pathways. Societe Generale is a founding signatory to the Principles for Responsible Banking and the Net-Zero Banking Alliance.

What progress has been made so far?

The Principles for Responsible Banking represent approximately 50% of global banking assets, whilst the Net-Zero Banking Alliance represents over 40% of global banking assets. The first two years of the Principles saw banks breaking new ground, building the foundations, mapping their activities, and working together to create the guidance, tools and knowledge base in previously unchartered waters across climate change, nature loss, pollution and social issues. Now in year three, the Principles are focused on helping banks to apply this knowledge, to accelerate in setting robust targets in their areas of most significant impact and supporting them in operationalising environmental and social considerations across their business. Key findings from the latest progress report show early signs of progress including that 94% of banks identify sustainability as a strategic priority for their organisation, 93% are analysing the environmental and social impacts of their activities, and 30% are setting targets, with a strong collective focus on climate and financial inclusion. Since inception, the NZBA has nearly tripled in size: from 43 founding members, it now convenes over 125 member banks from 41 countries, representing over 40% of global banking assets. For members who joined the NZBA at launch, their first set of intermediate 2030 targets were published in October 2022 - the first progress report showed the majority (90%) of the 43 banks that were due to publish targets have done so, and 19 additional members set and delivered their first targets well in advance of their 18-month deadline. Banks are forging new pathways and discovering best practice together – the Principles and the NZBA provide a way to collaborate and learn from each other. Through their lending and investment activities and through their extensive relationships with clients across all sectors of the economy, the banking community can accelerate a positive global transition for people and the planet while maintaining a high level of profitability.

 

The United Nations Environment Programme Finance Initiative (UNEP-FI) is a collaborative initiative between the United Nations Environment Programme and the financial sector. www.unepfi.org