Governance

The Spirit of Responsibility

The UN PRBs, unlike the UN PRIs and more like the SDGs, are expressed with proper and specific nouns first before any statement such as “we will…”. This gives it universal gravitas, and freedom to be applied in every way possible and every way that becomes possible. Given this property, the UN PRBs are relatively ageless to the UN PRIs. Here are the principles briefly reintroduced with their expansive character supported by extracts from the principles documentation issued publicly so far.

We find that a major challenge will be to understand metrics and apply frameworks and collect data that are not only standardized and normalized across banks for better assessment but also equally weighted on each SDG. Much of the supporting information provided by the UNEP FI so far is climate change heavy and cannot granulate completely how to quantify the principles’ universal and multifaceted character.

1. Principle 1 (Alignment) beyond alignment with global goals attempts to ensure improvement continues indefinitely by recommending that targets should “exceed mere alignment with the SDGs, the Paris Climate Agreement and other relevant national, regional or international frameworks.” There are standards such as the yet to be released ISO14097 relating to climate change that will be necessary for signatories to make progress addressing issues adverse to the SDGs embedded in their business practices.
2. Principle 2 (Impact) encourages growth into new sectors or client segments to increase positive impact as well as invest in technology and innovation for better outcomes. Banks will need to think about forward looking scenario-based assessments of risks and opportunities. Again an approach and methodology to do this in the area of climate change is provided by the Task Force on Climate related Financial Disclosure (TCFD). The PI Impact Radar can help identify impact across the greater sustainability spectrum. Banks are encouraged to “provide remediation for adverse impacts, which the enterprise has caused or contributed to.”
3. Principle 3 (Clients & Customers) suggests mapping clients by sector to identify their impacts on the SDGs and to play a role to support their management. It covers the integration of sustainability questions in onboarding and know your customer procedures and creating a “race to the top among clients” by giving incentives to the sustainable ones. Again the use of technology is encouraged to innovate and offer better suited products to a better understood client base in line with the global goals.
4. Principle 4 (Stakeholders) highlights the need to build relationships across the supply chain, contractual (e.g. employees and suppliers) and non-contractual (e.g. trade unions and governments), in different dosages to enable a bank to “deliver more that it could by working on its own”. It also calls for signatories to “proactively advocate for sustainable regulations and frameworks.” and to address “affected” stakeholders defined as those affected by a bank’s indirect impacts (e.g. wildlife) via NGOs. Once again, the use of technology for engagement is advocated.
5. Principle 5 (Governance and Target Setting) is more like two principles in one. The first being governance and culture, suggesting sustainability be shifted to the core of governance. Staff should integrate this into daily work practices, decisions and reward schemes and senior management need to communicate the company’s vision and mission in tune with its sustainability targets. The second being target setting, highlighting the need to set ambitious targets in line with one or more goals at a timescale in sync with that of the goals or, even better, earlier.
6. Principle 6 (Transparency and Accountability) draws on the need for accountability for a bank’s actions and its positive or negative impact on the global goals. 14 months after signing and annually after that, members will need to include UN PRB implementation data in their public reporting. It refers to frameworks that can be used, giving evidence that a guidance on assessing climate related risk will be released in May 2019. There will be two methods by which an external review process could be conducted: third party assurance or a defined scope review. The latter being where an accredited review partner only uses public information to assess whether a set of criteria are met by the bank.