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Transparency
Accountability
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dodgy deals
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Accountability what is at stake
The definition of transparency is described at its close the gap page as openness and communication with regard to all relevant information. But transparency alone is not enough. Access to all relevant information is a precondition to ensure accountability - to hold company managers, owners and financiers responsible for activities that impact other stakeholders. Responsible businesses accept their duty to be accountable and establish appropriate procedures and mechanisms to ensure compliance with established policies and to ensure that complaints and grievances are adequately addressed. Accountability can improve a company's credibility with its various stakeholders. When a company takes responsibility for activities that may have adverse impacts, it often has a positive effect on the stakeholders' perception that a company genuinely cares about being sustainable and is trying their best to achieve this. -readmore- Critics can (at times rightly) accuse companies of ‘green washing' and make continued attacks on their operations if no credible, effective, and objective mechanism exists for communities to challenge whether promises made are kept. An accountability mechanism therefore also offers several advantages to companies themselves, particularly those operating controversial projects. Companies are under increasing scrutiny wherever they operate. An increasing number now recognise the need for a credible, predictable, objective, and cost-effective fact-finding mechanism. Such mechanisms provide a forum to address the allegations, rumours, and other concerns that can arise in project-affected communities, and can offer companies an opportunity to hold civil society groups accountable by forcing them to subject their allegations to independent evaluation. Accountability applies to banks just as much as to other companies. As intermediaries and financiers, they share the responsibility for the possible impacts of their client's operations. Bank therefore could be held accountable not only for their own actions, but also for the actions of the clients for which they provide financing.
selected standards and initiatives
There is a difference between the mechanisms a bank can adopt to ensure institutional accountability and to ensure deal accountability. Institutional accountability Institutional accountability refers to all mechanisms and procedures the bank has adopted to ensure that its sustainability commitments are implemented throughout the organisation and applied to all relevant financial services. A first mechanism would be internal audits of the bank's Environmental and Social Risk Management System, including its sector and issue financing policies. Based upon these audits, steps should be taken by the bank's management to improve procedures and tools. A second mechanism could be performing external audits of the bank's Environmental and Social Risk Management System. A well-known external environmental standard is ISO 14001, which is used by banks to audit the environmental consequences of its internal operations (e.g. paper use). However, ISO 14001 is not suited to audit sector and issue financing policies. For an external audit of the bank's issue and sector financing policies another standard should be used. Institutional accountability is further increased when the results of these (internal and/or external) audits are made public, and the bank engages with stakeholders about these results. -readmore- However, the most important accountability mechanism entails consulting civil society groups regularly on the bank's sector and issue financing policies. To make this consultation effective, policies must be translated into languages understood by local stakeholders and civil society. This consultation should be a serious two-way process: if the bank is not prepared to take the concerns, grievances and other inputs of civil society groups seriously, the process is useless. Serious concerns should lead to the adaptation or revision of policies and procedures. AccountAbility has developed the AA1000 Series of Standards, a combination of accounting, auditing and reporting standards. The AA1000 Series consist of the AA1000 AccountAbility Principles Standard - providing a framework to better identify, understand, prioritise and respond to responsibility challenges; the AA1000 Assurance Standard - used to provide assurance on publicly available sustainability information; and the AA1000 Stakeholder Engagement Standard - providing a framework to help organisations ensure stakeholder engagement processes are robust and deliver results. Deal accountability Apart from accountability at the institutional level, the bank should also recognise its accountability to local communities and other stakeholders affected by specific deals and transactions. The sector and issue financing policies adopted by the bank are supposed to prevent or - in some unavoidable cases - mitigate or fairly compensate negative impacts on such stakeholders. Therefore, there should be a mechanism in place to ensure recourse for external stakeholders in case the bank's policies are not properly applied. The bank's clients have the first responsibility in dealing with environmental or social problems arising from their activities. Accordingly, The client should establish and manage a community grievance mechanism. Such a mechanism is already required for large impact projects financed under the Equator Principles but can be expanded to other businesses. This does not relieve a bank from its duty to ensure that its clients comply with the standards set in the bank's sector and issue financing policies. Banks should therefore establish a Bank Policy Complaint Mechanism for local and other stakeholders who are affected by bank-financed activities, as well as for NGOs that legitimately defend broader social and environmental interests. The mechanism should enable these stakeholders to file a complaint based on non-compliance with relevant sector and issue financing policies by a bank's client. Most of the multilateral development banks and several export credit agencies (ECAs) have put such mechanisms in place. A Bank Policy Complaint Mechanism is different from the general procedures for customer complaints. Rather, a Bank Policy Complaint Mechanism should deal with complaints and grievances in a serious and structured way and should therefore function independently - free from undue influence and pressure from companies, governments or NGOs. Further, the Bank Policy Complaint Mechanism should follow a codified procedure, ensure that the bank is obliged to respond to complainants and react to the final recommendations of the mechanism. This Bank Policy Complaint Mechanism could be set up and managed by an individual bank, or it may use mechanisms that are created within a group of committed banks - for example the signatories to the Equator Principles.
content of a bank policy
As this page focuses on accountability by banks themselves, the bank's policy primarily applies to the bank's own operations (institutional accountability). The elements for deal accountability can be applied to lending and investment banking and/or asset management and have been recorded as such in the scoring table. essential elements
The bank will, with respect to institutional accountability:
additional elements
The bank will, with respect to deal accountability:
scores
how do we score this?
analysis scores accountability
The 22 banks that are accredited one point have either an system in place to audit its Environmental and Social Risk Management System and investment policies, but does not publish the results or perform stakeholder engagement but not in accordance with AA1000 Stakeholder Engagement Standard (SES) or both. Actually none of the banks publish their audit results. Nine banks use the AA1000 SES for their engagement activities and received two points. Other banks report about their activities with stakeholders, meetings with organisations or advise of CSR experts.
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