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Banking and finance have an important role to play in promoting the green transition. So where are you at?

Demands for sustainability in the finance world are growing from all directions – not least from consumers and public authorities. It’s time to really show that we want to drive change and influence what a sustainable restart to society and business looks like in our new normal. And it’s a good idea to base this work on Agenda 2030 and the 17 Sustainable Development Goals.

Sustainability in the financial and banking world is a matter of urgency. The EU is tightening up regulations, for example through a taxonomy regulation that must be complied with from 31 December 2021. This is a tool that classifies investments as to whether or not they are environmentally sustainable and provide common guidelines on which investments can be described as being green. The taxonomy will also form a basis for future standards and labelling of financial products.

In addition, a recent report from consultancy EY shows that within two years eight out of ten institutional investors will stop investing in funds that do not take ESG (Environmental, Social and Governance) criteria into account. Another factor driving the pace of sustainability work is the effect of coronavirus. The pandemic is seen by many as a catalyst and some are even predicting that the pandemic will have purely disruptive effects.

Based on Agenda 2030

But let’s take it from the top. The 17 Sustainable Development Goals adopted by the countries of the world are to be achieved already in 2030. The aim is to protect our planet and its natural resources, to eradicate poverty, to ensure human rights and to create a dignified life for all. Agenda 2030 is to be used as a platform for all work on sustainable business development and sustainable enterprise.

“Everyone has a responsibility to contribute, but nobody can work on all 169 of the individual targets in Agenda 2030. It is a matter of finding a reasonable approach and tackling it step by step. Companies can interpret the goals based on how they affect their operations from a risk and opportunity perspective, and then prioritize,” says Mia Barkland, CEO of consultancy Trossa, which helps businesses and public-sector organizations become more sustainable. 

Contributing to positive development

Financial operators need to adapt their lending more and invest in companies based on a broad perspective of sustainability, and they need to take Agenda 2030 into consideration in their processes and guidelines. All companies should ask themselves how they can contribute to positive development in concrete terms based on their specific knowledge and core business.

“Agenda 2030 is a tool for clarifying why you exist and where you are headed, what you contribute and what you need to take responsibility for. It’s important to carry out this work arm-in-arm with suppliers, customers and other stakeholders to provide a good basis for the future,” says Mia Barkland.

She also thinks that sustainability work strengthens a company’s position as an employer at a time when many young people are driven more by a common purpose than previously. Being part of something bigger is something that more and more people are looking for and value in their choice of workplace.

Communicate the practical benefits better

A common situation in the banking and finance world is that there are sustainability plans in place, but the companies do not communicate sufficiently clearly how these are used in practice. Most need to be better at this. Drop the dreamy ideas and show what the sustainability plans do in concrete terms. Another common pitfall is to take on more than the company can manage.

“The best sustainability work is driven by integrating it into both long-term business planning and daily operations. It generally requires some considerable effort to get there, so it is a case of prioritising – doing one thing at a time and taking steady strides forward. And don’t forget your customers and suppliers,” says Mia Barkland.

How do you compare? Check against this list from the Sustainable Companies survey

Every year Aktuell Hållbarhet, Dagens Industri and the School of Economics and Management at Lund University survey the sustainability work of 134 listed companies, including banks. Handelsbanken is this year’s most sustainable bank – ranked top for the second year in a row. The survey gives banks a score for 12 criteria. How do you compare?

  • Has a policy for evaluating customers’ sustainability performance.
  • Has a specific framework for how customers’ sustainability performance is evaluated.
  • Framework presented.
  • Analyses its customers’ sustainability risks.
  • Describes how this is followed up.
  • Relates sustainability risks to credit risks.
  • Describes the process for active influence.
  • Offers customers with lower sustainability risks better terms (active influence).
  • Offers customers sustainability-related investment options.
  • Practises negative screening, i.e. removes options that do not meet sustainability requirements.
  • Describes the process for negative screening.
  • Practises active influence.

Source: EY Report