The Principles for Responsible Banking and UNEP FI Membership Resources Yuki Yasui Asia Pacific Region Coordination Manager UN Environmental Programme Finance Initiative yuki.yasui@un.org
UNEP FI members Europe 94 Asia Pacific 21 54 North America 27 41 Africa & Middle Latin American East & Caribbean Banking 134 Insurance 66 30 September 2018 Investment 37 Total 237
Sustainable Development Goals Directing long-term SDG ｓ economic growth Pulling long-term Social & International & Policy & environmental national public & capital allocation Regulation change private finance Creating long-term ESG risk New business Positive Impact corporate values management opportunities
Pulling long-term capital allocation: Social & environmental challenges Source: MSCI (https://www.msci.com/esg-investing) 4
Pulling long-term capital allocation: Share of ESG Institutional investors investment to 2014 2016 Growth rate total (USD billion) (USD billion) investments （ 2016 ） Europe 10,775 12,040 11.7% 52.6% Global ESG Investments USA 6,572 8,723 32.7% 21.6% Canada 729 1,086 49.0% 37.8% Australia & NZ 148 516 247.5% 50.6% Asia 45 52 15.7% 0.8% (excl. Jpn) Japan 7 474 6689.6% 3.4% Global 18,276 22,890 25.2% 26.3% Source: https://www.orixbank.co.jp/personal/investment/learn/esg/02.html
Pulling long-term capital allocation: National public & private finance 6
Pulling long-term capital allocation: Vietnam aims to mobilise Policy & Regulation 2/3 of SDGs financing from private finance SBV Banking Sector Strategy • Taxonomy: Green Project Catalogue (2017) • Policy incentives: Green Credit Programmes (2015, 2017) • Disclosure: Green Credit Reporting (2017) • Products, tools, capacity building: Environmental & Social Risk Management (2015) Source: UNEP Inquiry, Sustainable Finance Progress Report 2018 7
Becoming a sustainable bank: Creating long-term corporate values Principles for Responsible Banking Guide to Banking & Sustainability ESG risk New business Positive Impact management opportunities
The Principles for Responsible Banking 9
Going Forward Timeline Nov 26, Sep 22, 2018 2019 Webinars • Global Public Consultation Every six weeks • Two sessions - 9:00 (Until May 2019) AM CET and 4:00 PM CET • Upcoming • 17 April and Banks & Stakeholders can become Endorsers • 29 May 2019 Signing Ceremony & Draft Principles Announcement of launched by CEOs at Targets at UN HQ in NY UNEP FI Global Roundtable
Core Group Members 11
Endorser Banks (as at Feb 2019) 12
Purpose, Vision and Mission To transform the banking industry to play a leading role in achieving society’s goals A responsible banking industry that is an integral part of the society of the 21 st century because it serves and contributes to a sustainable, equitable economic and social development, protecting our natural environment Take a leadership role and use our products, services and relationships to support and accelerate the fundamental changes in our economies and lifestyles necessary to achieve shared prosperity for both current and future generations 13
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 .” • Integrate society’s goal into your business strategy and key business decisions, including your capital allocation decisions. • Identify areas of most significant positive and negative environmental, social and economic impacts. • set and publish targets that align your business with and ensure your bank’s significant contribution to SDGs and the Paris Climate Agreement. 14
Principle 2: Impact “We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services.” • Identify, assess and be transparent on significant (potential) positive and negative impacts. • Define KPIs to address, reduce and mitigate significant negative impacts and to scale up positive impacts. • Undertake forward-looking assessments of sustainability-related risks and opportunities at transaction, portfolio and strategic level. 15
The Principles for Positive Impact Finance (2017) Positive impact finance Positive Impact Finance is that which serves products in development to finance Positive Impact Business. 1.DEFINITION It is that which serves to deliver a positive UNEP FI’s Positive Impact aligned financial contribution to one or more of the three products are starting to be released. pillars of sustainable development • Société General issues its first Positive (economic, environmental and social), once 2.FRAMEWORKS Impact Bond (2015) any potential negative impacts to any of the • MC- UBS issues world’s first Positive pillars have been duly identified and Impact Finance Principles aligned mitigated . ‘Positive Impact Real Estate Investment’ 3.TRANSPARENCY with third part opinion (Jan 2019) By virtue of this holistic appraisal of sustainability issues, Positive Impact Finance Other Positive Impact Finance products in constitutes a direct response to the 4.ASSESSMENT pipeline challenge of financing the Sustainable Development Goals (SDGs). 16
UNEP FI Impact Radar An impact identification tool, to allow holistic impact analysis across SDGs Purpose • Defines ‘impact’ as opposed to actions fulfilling impacts • Captures needs across geographies Relevance • Relevant across all categories of financial instruments and any sector of business activities that underpin them Application • ex-ante impact identification - predictive models, due diligence, etc • ex-post analysis - monitoring, measuring & reporting on identified impacts
UNEP FI Online Training Environmental & Social Risk Analysis 2019 11 - 29 March 27 May to 14 June 9 – 27 September 4 – 22 November Training fee: • Representatives of medium-sized and large financial institutions (non-UNEPFI-members) USD1050 • Representatives of small financial institutions (non-UNEPFI-members) USD 890 • Representatives of UNEP FI members (including from headquarters & from subsidiaries) USD 700
FSB’s Task Force on Climate Related Financial Disclosures (TCFD) Recommendations • Recognition of environmental risks as financial risks by the FSB • Forward-looking assessment of risks • Expanding time horizons • Use of scenario-analysis (≠ stress testing scenarios) • Dealing with climate change in a proactive vs. reactive way
UNEP FI TCFD BANKING PILOT PROJECT SCENARIO-BASED APPROACH FOR ESTIMATING THE IMPACT OF CLIMATE CHANGE ON CORPORATE LENDING PORTFOLIOS Transition Risks & Opportunities Physical Risks & Opportunities
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.” • Systematically support clients in adopting new technologies, business models and practices and encourage and support sustainable behavior and consumption choices among retail customers. • Take action, such as development of new products and services or sustainability-related incentives and contract-conditions. • Help ensure that your retail customers have the knowledge and skills to effectively manage their finances. 21
Creating long-term corporate values: New business opportunities Characteristic Investment Banks Insurance • Green Bond Use of proceeds Green Loan Principles Principles for Principles (ICMA) (ICMA) Sustainable • Social Bond Principles Insurance’s Global (ICMA) guidance on the integration of ESG Pricing mechanism tied to [Sustainability-linked risks into sustainability score/ loans] insurance performance underwriting • Equator Principles Project finance (UNEP FI) • Green Investment Principles for the Belt and Road Holistic impact analysis & Principles for Positive Impact Finance management (UNEP FI) 22
Developing Positive Impact Finance Products CLARIFY THE IMPACTS Clearly determine and describe the intended impacts and outcomes ESTABLISH MARKET & Ensure the approach meet market norms and SUSTAINABLE standards while tangibly contributing to RETURNS sustainable development MEASURE Have clear and transparent methodology(ies) to IMPACTS measure ex-ante and ex-post the expected outputs, and intended outcomes Check it goes beyond a ‘business as usual’ or ‘best ADDITIONALITY practice as usual’ trajectory, yielding impact and OF finance flows which otherwise would not have IMPACT/FINANCE been delivered
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