A higher standard

  • 18 February 2022
  • Blog | Green Finance | Blog

Drawing on statistics from Mazars’ Responsible banking practices: Benchmark study 2021, we explore the key themes, priorities, and performance of the global banking industry as it attempts to hold itself to sustainability and ESG goals, in the face of the pandemic and other global pressure.

In the face of significant market upheaval following the COVID 19 pandemic, Mazars’ Responsible banking practices: Benchmark study 2021 has highlighted some significant steps that global institutions are making towards a more sustainable finance model.

Though the study does point out that full implementation of best practices to achieve sustainability and climate neutrality are still “a work-in-progress”, findings suggest that banking leaders are taking sustainability goals seriously and making meaningful strides towards a sustainable future.

This year’s findings showed that, on average, 74% of banks are holding senior management accountable to fostering a culture of sustainability, an impressive increase from last year’s 49%. Environmental, Social and Governance (ESG) skills are still largely overlooked when it comes to executive board appointments, however, with ESG and sustainability taking a more leading role in the minds of senior management, we can hopefully look forward to further progress in this area.

The study also revealed that 78% of banks who participated in the study had developed a corporate green bond offering, with many also making sustainability-linked bonds and loans available. It should be noted though that only 32% were making similar offerings available to SMEs and individuals.

Although the study shows banks making strong moves in the right direction, it also highlighted some of the challenges that remain for the sector, as banking leaders attempt to bring their organisations in line with government sustainability targets.

Meaningful reporting remains a significant hurdle for many organisations, due to the lack of clear and concise quantitative data. When assessing banks’ abilities to implement risk management practices that are more advanced for climate risks than broader ESG risks, only 22% of banks could provide quantitative data, leaving the financial impact of climate change on banks largely unknown.

Similarly, when examining banks’ ESG reporting capabilities, the study found that, while most banks have implemented sustainability reporting standards, largely focussed on environmental impact, the level of detail provided in their reports was generally low. Only 11% of banks disclosed matters in relation to their financing activities.

Mazars ranks banks into four categories, following an evaluation of each year’s study: Outstanding, Leaders, Supporters, and Followers. It is encouraging to see that, for the first time, one bank achieved the ‘Outstanding’ category, with a score of 95% for meeting the assessment criteria. There were more than double the number of banks categorised as ‘Leaders’ (21%) compared to last year (10%) and 57% of banks categorised as ‘Supporters’, up from 33%.

Looking to the future, the development of governmental initiatives, such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation, as well improvements in data availability, following climate stress testing in the UK and Europe, will likely drive further improvements in the areas that banks are still lacking.

As financial institutions start to take a more leading role in mitigating climate change, it’s encouraging to see quantifiable year-on-year improvements from such a wide spectrum of global banking organisations. It’s clear, however, that these developments need to continue in earnest if we are to meet the challenges of climate change and build a sustainable industry in the coming years.

Visit the Chartered Banker Institute’s Centre for Responsible Banking at
CBI | Centre for Responsible Banking (charteredbanker.com)