UNEP FI principles for responsible banking


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On 22 September 2019, the United Nations and a group of 130 banks from 49 countries officially launched the Principles for Responsible Banking (Principles) in New York City during the annual United Nations General Assembly.  The Principles were developed by a group of 30 founding banks through an innovative global partnership between banks and the United Nations Environment Finance Initiative (UNEP FI).  The Principles have already been endorsed by more than 100 financial sector institutions around the globe such as banking associations, regulators, investors and civil society organisations.

The Principles provide a global framework for the development of a sustainable banking system that is designed to support today's emerging global sustainable development economy and guide the banking industry to align itself with and achieve society's goals as expressed in the United Nations' Sustainable Development Goals and the Paris Climate Agreement.

They also importantly enable a bank to embed sustainability at the strategic, portfolio and transaction level across all its business areas, and to identify where it has the potential to make the most impactful contribution to a sustainable world.  The Principles also position a bank to leverage new business opportunities with the emergence of the sustainable development economy.

What are the Principles?

There are six Principles, and banks which become signatories to the Principles make a commitment to the underlying ambitions of each principle.

Principle 1: Alignment

A signatory bank will align its business strategy to be consistent with and contribute to individuals’ needs and society’s goals as expressed in the Sustainable Development Goals, the Paris Climate Agreement and the relevant national and regional frameworks.

Principle 2: Impact and target setting

A signatory bank will continuously increase its positive impacts while reducing the negative impacts on, and managing the risks to, people and the environment resulting from its activities, products and services by setting and publishing targets where it can have the most significant impacts.

Principle 3: Clients and customers

A signatory bank will work responsibly with its clients and customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.

Principle 4: Stakeholders

A signatory banks will proactively and responsibly consult, engage and partner with the relevant stakeholders to achieve society’s goals.

Principle 5: Governance and culture

A signatory bank will implement its commitment to the Principles through effective governance and a culture of responsible banking.

Principle 6: Transparency and accountability

A signatory bank will periodically review its individual and collective implementation of the Principles and be transparent and accountable for its positive and negative impacts as well as its contribution to society’s goals.

The Supporting Framework Documents

The UNEP FI has also released the following supporting framework documents to the Principles:

  • The Principles Signature Document, which sets out the six Principles and their preamble;
  • The Key Steps to be Implemented by Signatories, which details the key steps with regards to impact analysis, target setting and implementation, and accountability which signatory banks need to take to ensure the effective implementation of the Principles; and
  • The Reporting and Self-Assessment Template, which provides a guideline to signatory banks for transparency on the progress in implementing the Principles.

In view of the fact that banks which commit to the Principles will differ significantly in context and starting points, an Implementation Guide has also been made available which provides specific guidance in respect of each Principle for banks that are just starting out as well as for banks that are relatively advanced and are looking for guidance on how to continuously improve their performance.  

Becoming a Signatory Bank and Implementing the Principles

In order to become a signatory to the Principles, the CEO of a bank must sign the Principles Signature Document followed by a public announcement by the bank of its endorsement of the Principles, together with a quote from the bank's CEO.  Signatory banks must also apply for membership to the UNEP FI.

Being a signatory bank calls for a bank to take certain steps to ensure the quality and credibility of its commitment to, and progress in, implementing the Principles.  In order to ensure effective implementation of the Principles, there are three key steps to be taken by signatory banks.

The first step is an impact analysis whereby a bank will identify its most significant positive and negative impacts on society, the environment and the economy where it conducts its business.  This will also help a bank to formulate strategic business opportunities through which it can increase positive impacts and decrease negative ones.

The second step is target setting and implementation.  Having identified its most significant positive and negative impacts, a bank will then set at least two ambitious targets.  These targets would have to be 'SMART' – specific, measurable (quantitatively or qualitatively), achievable, relevant and time-bound, to reduce the significant negative impacts and increase the bank's positive impacts.  Once the targets are set, the bank will then begin implementation towards achievement of the set targets and set milestones in order to effectively monitor and measure its progress.

The third step is to demonstrate accountability.  A bank must publicly report its implementation of the Principles and the progress made towards reaching its set targets.  There is no requirement for banks to produce an additional standalone report for this purpose.  Instead, the Principles require that a bank discloses its progress within its existing public reporting by describing how it is implementing the Principles and provide an assured assessment of the progress that the bank is making.  The Reporting and Self-Assessment Template sets out the information which a bank should address in its public reporting.

The Principles are designed with the understanding that each bank is beginning this process from a different starting point.  As such, a bank will have 18 months to publish its first report and four years to implement the three key steps set out above.

The UNEP FI Secretariat will engage with banks and provide support and guidance in achieving the reporting timeline.  In the event a bank does not progress over time and cannot provide a reasonable explanation for failing to meet its commitments, the bank may be removed from the list of signatories.

The Principles Benefit Signatory Banks

The Principles provide a single comprehensive framework for effectively responding to the emerging sustainable development economy across a bank's entire business at the strategic, portfolio and transactional levels.  Committing to the Principles would also enable a bank to seize new business opportunities created by the emerging sustainable development economy, while at the same time enabling a bank to effectively identify and address related risks and mitigate any negative impacts of its activities.

The Principles can help strengthen trust in a bank and ensure that it remains not only relevant and competitive in this new era, but also assist it in increasing its value to those that it serves by demonstrating its alignment with the emerging sustainable development economy.  This includes responding to the evolving needs and rising expectations of clients, customers, regulators and investors.  The Principles also provide direct access to expert knowledge, tools and resources to strengthen a bank's position and capacities within the emerging sustainable development economy.

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