The financing and investment activities of the banking sector generate significant impacts. In a logic of fair and sustainable transition that is increasingly prevalent, banking institutions therefore aim to increase their positive impacts tenfold. They must also reduce their negative impacts. This implies developing robust strategies to manage and remediate their socio-environmental risks – particularly in sensitive industrial sectors. This is precisely the role of sectorial policies.
They guide the bank’s various departments in indexing financing or investment decisions on socio-environmental and governance criteria in addition to assessing economic performance. The sectoral policies set out the exclusion and/or evaluation criteria for clients and/or their projects, and constitute public reference documents for the group.
the challenge
It is in this context that we have partnered with a major consulting firm to update 8 of the sectoral policies of a top 20 largest world banks, its environmental and social policy and various cross-cutting commitments (biodiversity and human rights in particular). The latter intends to reflect its commitments in terms of responsible finance and integration of ESG issues, but also to frame the assessment and control of the most significant ESG risks within its activities.
Together, we have revised the general E&S principles and sectoral policies, updating exclusion and/or assessment criteria. Lastly, practical guides for applying these policies have been drawn up for the teams.
OUR APPROACH
Ultimately, the aim was to establish a common framework, translated into guidelines that could structure the effective operationalization of the Group’s ESG policies. To this end, we have provided the Group’s teams with a reference framework and documentation of best practices in this area.
- To update the fundamental principles, cross-cutting commitments and corresponding sectoral policies, we began by examining developments in the regulatory landscape, international conventions and standards, and voluntary and sectoral reference initiatives.
- On this basis, our teams mapped the main social and environmental risks by priority sector for the Group.
- This prioritization of the Group was also confirmed by the documentation of controversies. This study complemented the benchmarking work that enabled us to compare and examine best practices on the associated sensitive issues. As a result, we recommended the inclusion of new criteria on issues as diverse as greenhouse gas emissions, biodiversity protection, social inclusion and human rights.
- The Ksapa team shared its ESG expertise to synthesize market expectations and best practices across 8 priority sectors, including mining, oil & gas, dams & hydroelectricity, maritime transport, coal, thermal power plants, palm oil, etc. The documents produced allowed for an update of public sector policies and the formalization of operational guides for internal use, explaining the issues and application methods.
The effective operationalization of the institution’s sectoral policies was based on dialogue with internal stakeholders. We therefore systematically compared and reinforced our recommendations through interviews with the Group’s sector experts and its CSR and risk team, etc.
RESULTS & NEXT STEPS
The Group was presented with new selection criteria to rigorously assess the consistency of its clients and transactions with its global strategy, as well as avenues for developing new sectoral policies in light of best practices in the banking sector and emerging issues and sectors (e.g., digital economy or biotechnologies).
The banking institution must now prioritize its efforts and consider extending its socio-environmental thinking to other high-risk sectors. Eventually, the group will be able to adopt increasingly ambitious selection criteria and ensure their operationality.
