Brussels, 30/06/2015 (Agence Europe) - The major European banks are not sufficiently evaluating environmental or socially-related risk factors that companies have to face, such as climate change, water shortages and sustainable production. These failings were highlighted in a KPMG Sustainability study published on Thursday 25 June.
The Ready or not: An assessment of sustainability integration in the European banking sector study demonstrates that this situation is damaging society and runs counter to the banks' social responsibility, as well as their profitability. The study was carried out with the support of WWF International and looked at around 12 major European banks.
According to the authors of the study, the banks should provide a more thorough going evaluation of the way in which environmental and social issues could create risks to their corporate clientele, as well as the opportunities created by these risks and what their negative impact could be on the companies' financing requirements.
Barend van Bergen, partner at KPMG Sustainability, explains that “For instance, companies in the energy sector are facing growing financial risks as renewable energy is becoming more competitive. This could have a significant impact on the creditworthiness of conventional energy companies. In addition, for many of these companies, switching to cleaner energy creates a need for substantial financing. Besides, with regard to credit facilities banks pay generally insufficient attention for the initiatives of companies aimed at improving the environment and the development of new markets, products and services”.
He also added that transparency regarding companies' social role is also becoming more important. Analysts and investors want to understand the risks confronting the banks and what investments could be put under pressure, such as financing activities linked to child labour or other human rights violations.
The study shows how the banks are adopting a quite narrow approach to sustainability issues, focusing on whether or not they want to finance certain activities.
“The study shows that the banking sector at large does not yet have an adequate strategic response to manage material business risks linked to environmental and social realities. Developing such an approach is what is going to enable the banking sector to move from a reactive stance to a leadership role”, explained Maria Boulos, director of Corporate Engagement at WWF International. (Aminata Niang)