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Eurosif (European Sustainable Investment Forum) publishes today a report highlighting critical environmental, social and governance issues currently facing the European banking industry.
The financial crisis has so far led to limited changes in the banking industry. The number of failures and restructurings appears quite low bearing in mind the depth of the crisis and the extent of government support aimed at offsetting systemic risk. But banks will clearly get the bill ultimately with significantly more regulation. The G-20 has already spelled out the key focus of banking reform: higher capital requirements, better capital quality, lower leverage, further risk control and ultimately reformed governance and remuneration systems. The upcoming summit will likely see accelerated these issues going into 2010. Stronger supervision of hedge funds and tax havens should add to the shift towards further transparency in the sector.
Matt Christensen, Executive Director of Eurosif, says “This report is published at a time when banks are being scrutinised for their investments and their remuneration practices. Responsible remuneration is an example of a key issue where banks may play a positive role in setting exemplary remuneration policies which are designed to encourage long-term performance.”
Eurosif partnered, for the research side of the Banking report, with CA Cheuvreux, the first European broker to be a signatory to the UN-backed Principles for Responsible Investment. The sector note was presided over by a steering committee of financial analysts and NGO representatives to debate the issues and develop ways to present the stakeholder and financial points of view. The steering committee included representatives from Bank Sarasin, Domini Social Investments, Fundación Ecología y Desarollo (ECODES), IDEAM, Living Planet Fund Management Company S.A., Oddo Securities, Pictet Asset Management and Triodos Bank.
Stéphane Voisin, Head Sustainable & Responsible Investment, from CA Cheuvreux states, “In terms of Environmental, Social and governance research, a key feature of the report is to examine systemic vs. specific risks and mitigation solutions for future risk spreading from one bank to the entire sector, and to the rest of the economy. The objective is to provide synthetic sustainability business tools for investors and regulators towards the perspective of a sustainable banking industry.
These Eurosif briefings aim to guide policy makers, mainstream and specialist SRI investors, pension fund trustees, and companies understand risks that are not consistently integrated into traditional financial analysis, but which have the potential to influence companies’ shareholder value and fund managers’ investment decisions.
Eurosif’s banking report will be followed by reports on Remuneration / Long-term incentives and Infrastructure this year.
To view the banking report please go to http://www.eurosif.org/publications/sector_theme_reports
