Barclays, Citi, Santander among banks yet to “fully embed” ESG practices

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Thirty banks including Barclays, BBVA, Citi, Credit Suisse, Santander and UBS, were assessed on how they have integrated ESG factors into their commercial practices, and none were judged to be ‘outstanding’, according to a new benchmark report by audit, accounting, and consulting firm Mazars. 

For an ‘outstanding’ ESG score, banks had to have a positive score in more than 90 per cent of the criteria. Benchmark criteria included culture and governance, risk management, reporting, targets and more.

The report, ‘Responsible banking practices: benchmark study 2020’, found that over half of banks sampled showed ‘limited evidence’ of a sustainable approach across most criteria. Banks were often found to focus on environmentally responsible products, but product offerings were yet to fully address socio-economic issues.

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

Many banks have recently reflected on their purpose and values as the rise of social movements have reshaped 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, adds: “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 are starting to promote change. Barclays has plans to embed human rights considerations into its client due diligence process, and 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, 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.