Fribourg, June 7, 2006

Responsibilities of banks to mitigate climate change. A study into climate change best practices amongst banks

SiRi Company network partner Dutch Sustainability Research (DSR) today published a report with best practice guidelines for commercial banks to mitigate climate change. The guidelines aim to provide a reference framework for banks in order to reduce direct CO2 emissions from operations and, more importantly to reduce their indirect CO2 emission caused by their clients’ operations. The report was commissioned by Milieudefensie - Friends of the Earth Netherlands.

Climate change is one the most important environmental threats of the 21st century, with possibly devastating results for humanity and the world’s environment. Commercial banks can play a special role to reduce CO2 emissions and hence mitigate climate change. Banks produce CO2 from their operations (direct CO2 emissions) and, more importantly, they also indirectly generate CO2 emissions by financing companies and buildings that ‘generate’ CO2 emissions (indirect CO2 emissions). Indirect emissions are much larger than the direct emissions of the banks. In both areas banks can take important steps to address climate change. Recently, a number of important US banks have become aware of their special role and responsibilities with regard to climate change issues. In order to reduce CO2 emissions in a more systematic manner, they have introduced formal climate change policies.

Marcel Jeucken, Head of Institutional Relations DSR: “Dutch banks are often regarded as sector leaders in terms of sustainability. However, based on the findings of our report, it becomes clear that major Dutch banks, including ABN AMRO, Fortis Bank, ING Bank and Rabobank, have so far failed to adopt comprehensive climate change policies. They should commit themselves to reducing their direct and, more importantly, their indirect CO2 emissions.” When it comes to direct emissions, ABN AMRO is an exception as it has set a clear target to reduce its direct CO2 emissions. Triodos Bank is, as one of the smaller banks covered in the report, the only bank that has comprehensive reporting on its direct CO2 emissions and the only bank that is fully carbon-neutral.

Dutch banks’ direct CO2 emissions represent some 0.8 Mega tonnes (Mt). This is an estimated 0.37% of total Dutch CO2 emissions of 218 Mt in 2005. To become carbon neutral, it is estimated that the Dutch banks covered in the report would together have to spend an estimated EUR 17 million per annum, i.e. some 0.1% of their aggregated net profit in 2005. On the basis of publicly available information the total indirect CO2 emissions have also been estimated. The EUR 2,705 billion of combined total assets of the four major Dutch banks provide financing to companies that annually generate some 750 Mt of CO2. This represents some 2.8% of annual global CO2 emissions, or three times the Dutch economy’s total annual CO2 emissions of 218 Mt. These are rough estimates, as globally there is a lack of sufficient information on the CO2-intensity of the different sectors and public reporting of banks as to the recipients of financing or investments is insufficient. Based on the findings of the report, ABN AMRO and ING have the largest indirect CO2 emissions.

A number of big foreign banks have established strong and comprehensive climate change policies and announced plans to systematically integrate climate change considerations into their day-to-day business. The studied major Dutch banks currently seem to lag behind these banks. Therefore, this report also examines best practices in the field of CO2 emissions reductions for a selected number of international banks. Bank of America has the most extensive climate change policy. It has the most ambitious targets to reduce direct CO2 emissions and is the only bank that has also set a target to reduce indirect CO2 emissions for part of its client portfolio. British bank HSBC also provides a good example since it is the first major international bank that has become carbon neutral by the end of 2005. It compensates CO2 emissions from own operations and those caused by business travel. An external auditor has verified whether HSBC is indeed carbon neutral.

The US and UK banks reviewed in the report are more explicit about their goal to reduce indirect CO2 emissions and have developed (more comprehensive) climate change policies. This approach can be characterised as “top down” (starting at the policy level). The research shows however that these banks so far offer only a very limited number of climate change related products or services. The Dutch banks follow a “bottom up” approach. They have developed more climate change related products and services, but lack a climate change policy. Both approaches have their advantages and banks can clearly learn from each other. However, when it comes to implementing climate change considerations into day-to-day business as well as measuring and reporting on emissions and progress towards targets, current practice leaves much room for improvement for both groups of banks.

Climate Change Action List
Based on the finding of the report, it is recommended that banks become more pro-active on climate change related issues and develop a systematic framework for action. The following seven guidelines are considered best-practice standards that all banks should aspire to:

1. Establish a comprehensive climate change policy as a framework for action
2. Set clear reduction targets for both direct and indirect CO2 emissions
3. Use renewable energy and make own operations carbon neutral
4. Clarify how to promote and engage with climate change leaders and laggards
5. Lay out engagement and public policy position
6. Develop new climate change related products and innovate
7. Report annually on direct and indirect CO2 emissions and progress towards targets

To download the full report, please click here (PDF format) or www.dsresearch.nl/dsr/nieuws/

For more information, please contact:
Mr Ronald Lubberts, Head Institutional Relations, Dutch Sustainability Research
Phone number +31 30 6942618 / info@dsresearch.nl

Or:
Mr. Philippe Spicher, Managing Director, SiRi Company
Phone number +41 (0) 79 24 35 955