Andrea Gammon – BankTrack
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The Principles for Responsible Banking (PRBs) were published for consultation by the United Nations Environment Programme Finance Initiative (UNEP-FI) in November 2018 as a new initiative designed to promote responsible banking.
The six principles encourage banks to align their operations at "strategic, portfolio, and transactional levels" with prevailing social and environmental commitments, particularly as expressed in the Paris Climate Agreement and the United Nations' Sustainable Development Goals (SDGs). The PRBs are open for comment until 31 May 2019, with the finalized proposals expected in September 2019. To date, 49 banks have endorsed the draft of the PRBs.
A decade after the financial crisis, banks are eager to build trust and to demonstrate reliability. In this context, the PRBs set out to define what it is to be a responsible bank now and in the future and to set a global standard for responsibility. The PRBs aim to provide a framework through which banks can align their strategy, portfolio, and business practices with society's social and environmental goals.
The draft PRBs were developed in a closed process by 28 banks from around the world, with advice from a group of 12 hand-picked civil society organizations. During the current consultation phase, banks can endorse the draft principles; when they are finalized, banks can adopt them. Banks will be classified as a "Starter", "Intermediate", or "Advanced" bank, depending on their starting commitments.
As a PRB-signatory, banks will be required to assess their positive and negative social, economic, and environmental impacts and, based on these impacts, to set and publish targets and in accordance with the ambitions of the Paris Climate Agreement and the SDGs. Additionally the PRBs include commitments on stakeholder engagement, accountability, and transparency. Banks that continue to fail to meet their targets or fail to adhere to the PRBs will lose their signatory status.
A six month consultation period has followed the November 2018 announcement of the PRBs draft, and UNEP-FI is currently soliciting feedback for revision of the PRBs.
The six principles
The proposed principles are as follows:
Principle 1 - Alignment
"We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals (SDGs), the Paris Climate Agreement and relevant national and regional frameworks. We will focus our efforts where we have the most significant impact."
Principle 2 - Impact
"We will continuously increase our positive impacts while reducing our negative impacts on, and managing the risks to, people and environment resulting from our activities, products, and services."
Principle 3 - Clients & Customers
"We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations."
Principle 4 - Stakeholders
"We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals."
Principle 5 - Governance & Target Setting
"We will implement our commitment to these Principles through effective governance and a culture of responsible banking, demonstrating ambition and accountability by setting public targets relating to our most significant impacts."
Principle 6 - Transparency & Accountability
"We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals."
The draft of the PRBs has been endorsed by 49 banks to date, but the principles have not yet been finalized. A six month consultation period extends from the November 2018 announcement through 31 May 2019, during which UNEP-FI has invited comment on the proposed framework from banks, investors, regulators, and civil society. The finalized PRBs will be announced in September 2019 at the United Nations General Assembly in New York.
While acknowledging the PRBs as a "welcome and long overdue commitment from banks to fully align their businesses with society's needs", BankTrack has called publicly for UNEP-FI to go further with the framework and is coordinating an NGO response to the consultation process.
BankTrack urges UNEP-FI to shift the focus of the PRBs from aspirational principles towards the specific commitments banks need to make to be aligned with the Paris Climate Agreement and the SDGs, and accordingly, recommends renaming the intitiatve "Commitments for Responsible Banks". For example, these commitments would require the immediate end to financing for all new fossil fuel projects, phasing out existing fossil fuel investments, and severing relationships with clients whose commitments are fundamentally incompatible with the Paris Climate Agreement or the SDGs.
For more information on the NGO feedback process or to get involved, please contact Andrea Gammon.