ENVIRONMENTAL AND SOCIAL RISK
– From awareness to action
Oman, January 2013
www.unepfi.org
Introduction
2
f
f
Início
de
tour
du
monde
The
Story
of
a
Steel
Factory
f
f
f
f
f
f
f
f
e
3
Business & the Environment
4
Externalities
Externality: A (positive or negative) consequence of an economic
activity that is experienced by unrelated third parties.
Positive externalities:
• Stable Climate
• Water availability and water quality
Negative externalities:
• Poor air or water availability and quality and related health problems
• Loss of biodiversity and/or cultural heritage
Maintaining
air quality
Keeping
rivers clean
Externalities now
have a price
$$$
Keeping the climate
stable
6
Preserving
cultural
heritage
The soaring cost of
“externalities”
–
–
–
–
–
–
–
–
Cost of water
Cost of water treatment
Cost of waste disposal
Cost of cleaning contaminated land
Cost of reducing air polution
Cost of emmitting CO2
Environmental fines
Cost of paying indemnities / dammages
What about the Middle East Region?
8
Drivers for Environmental & Social
Risk Management
9
“A successful bank can no longer just
look at the commercial performance of a
customer. It has to consider its broader
performance in environmental
and social issues.”
Roberto Dumas Damas
Banco BBA Creditanstalt, Brazil
10
IFC Beyond Risk Survey:
Risks for a FI’s clients
11
IFC Beyond Risk Survey:
Risks for Lenders
12
Regulators
• Green Banking / Green Credit policies
• Central Banks in some countries are starting to take
action
• Basel III shifts focus to ‘material risk’, and the expectation
for E&S risk to be specifically mentioned is rising
13
Investors & Capital Markets
Investors:
Collaborative engagements by PRI signatories
Engagements with companies on Carbon Disclosure Project data * Investor
statement calling for global arms trade agreement * Investor statement in
support of Prof. John Ruggie’s Draft Guiding Principles * Pilot Project on
Responsible Business in conflict affected and high risk areas * Sudan
Engagement Group * Sustainable stock exchanges
Capital Markets:
•
•
Sustainability Indices > rewards those who do well.
Growing drive for ‘sustainable stock exchanges’, including mandatory reporting for
listed companies.
14
Multilateral / Development Banks
• Have some of the most advanced/ sophisticated E&S
Risk Management policies and procedures
• Increasingly working through or with private sector Fis
• Access to deals is dependant on E&S Risk
Management capacity
15
NGOs: You are being watched
From NGO campaigns to Bank Track to the Wall Street
Movement...
16
New York Times
Ad by
Rainforest Action
Network (RAN)
2002
Início de tour du monde
18
New York, 2003
Peer Pressure
Carbon
Equator
UN Global UNEP FI
Disclosure Principles Compact
Project
Global
Reporting
Initiative
Bank of America
√
√
√
Barclays
√
√
√
√
Citi Group
√
√
√
√
Self
Declared
Credit Suise
√
√
√
√
Self
Declared
Deutsche Bank
√
√
√
GRI
checked
HSBC
√
√
√
√
√
Standard Chartered
√
√
√
√
√
19
Conclusions
20
Launched in 2003, the Equator Principles provide an environmental and
social management methodology for project finance.
Over 70 financial institutions have currently adopted them.
The Principles are a voluntary but widely recognised standard.
It’s not all about Risk!
“Risk Management can help
you seize opportunity, not just
avoid danger”
• Dan Borge, former MD of Bankers Trust
23
A Great Opportunity for Smart FI’s– the
Green Economy
Going forward will banks be more critically judged for their:
investment in old polluting technology?
commitment of funds that cause the loss of biodiversity and
ecosystems?
UNEP’s “Toward a Green Economy” estimates that the
investment required will be USD1.3 trillion per year from
2010 to 2050.1
The WEF and Bloomberg calculate that clean energy investment
must rise to USD500bn by 2020 to restrict global warming to 2
deg.1
HSBC estimates a USD10 trillion growth in cumulative capital
investments between 2010 and 2020.2
It is estimated that more than 80% of this financing needs to come
from the private sector.
1. Towards a Green Economy, UNEP (2011)
2. Sizing the Climate Economy, HSB Global Research 2010
24
25
Will the Middle East become home to
Tomorrow’s Sustainability Leader?
IFC/FT Awards designate the Sustainable Bank of the Year
since 2006
• 2012: Standard Chartered Bank
• 2011: Banco Itau, Brazil
(Regional winner for Europe: Co-operative Financial Services . CrossRegional Winner: Bank Sarasin, Switzerland)
• 2010: Co-Operative Financial Services, U.K. , Runner-up: HSBC,
U.K.
• 2009: Triodos Bank, Netherlands. Runner-up: Standard Chartered,
UK
26
Changing Finance to Finance Change
Business
Business as
as usual
usual
Unsustainable
economic activity
BANK
BANK LENDING
LENDING
Environmental
Environmental and
and Social
Social
Risk
Risk Management,
Management,
Engagement,
Engagement, and
and
Financing
Financing
Gradual shift to
sustainable
economic activity
27
Contact
Robert Tacon
Robert.tacon@btinternet.com
UNEP Finance Initiative
www.unepfi.org
28