EUROPE - Some of Europe's big name banks could risk their profits and reputation if they fail to address the environmental impact of some of their lending policies.
Default rates and customer loyalty are also at stake if environmentally unsound policies are left unchecked.
Santander Central Hispano, Societe Generale, UniCredito Italiano have all been placed at the bottom a new SRI (Socially Responsible Investment) league table of 10 sample European banks, compiled by Friends, Ivory & Sime (FIS) and the University of Strathclyde, Scotland.
Other banks which have also been warned about the potential risks include HSBC, ING Group, Royal Bank of Scotland and Standard Chartered.
Karina Litvak, head of FIS's governance and SRI division, said: Investors have traditionally, and understandably, focused on the environmental impact of companies that operate in so-called ‘dirty industries’.
“This report is different as it focuses on the financial services sector, which has typically been seen as a ‘clean’ services business that steers clear of controversies like pollution or human rights. It’s time the industry realised that as funders of companies with high environmental impacts, banks share in the risks their customers incur and the influence they have on the wider environment – and as shareholders in these banks, we are one link up the chain of responsibility.”
There is mounting evidence of interest in ‘clean’ investment, with pressure coming from investors, ‘green’ groups and governments. Recent times have seen the introduction of disclosure legislation in some countries - including Australia, Canada, Germany and the UK - requiring statements as to whether SRI practices are being followed. In the study, Santander, Societe Generale, UniCredito were put in the category “on the starting grid”. HSBC and Royal Bank of Scotland were categorised as the chasing pack
And Barclays, Credit Suisse and Lloyds TSB were placed in the table as race leaders who had “relatively mature and detailed review procedures.
FIS said these banks, which had a total market cap of E389bn, had begun to review their options, but have yet to articulate a full set of policies, much less implement detailed operational procedures.
The study is a prelude to a bigger league table that will also include investment banks and insurance companies.
FI&S has £66bn asset under management and is leading proponent of SRI.
A Benchmarking Study: Environmental Credit Risk Factors in the pan-European Banking Sector is available at www.friendsis.com.
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