Banks' Policies Continue to Deviate from Practices

Banks’ Policies Continue to Deviate from Practices

Mind the Gap: BankTrack rates credit policies of 45 banks

New report reveals continuing gap between policies and practice

The banking sector is showing progress in developing credit policies that deal with the social, environmental and human rights aspects of their operations, but this progress is slow and unequal, with some banks leading the way and many lagging far behind. Moreover, there continues to be a worrying gap between adopting stringent policies on the one hand and implementing them in day to day investment decisions on the other.

This is the conclusion of “Mind the Gap,” a new report and website launched today by BankTrack, the international NGO network monitoring the financial sector. The report, based on a ten month research project, evaluates the credit policies of 45 major international banks on three dimensions: the content of sector and issue policies, the level of transparency and accountability and the implementation of policies. U.S. banks covered include Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, and Morgan Stanley.

— Outline of content —

First, the report compares the content of seven sector and seven issue policies against a “good policy standard,” as derived from international treaties, guidelines and best practices. Existing bank policies, or the absence of it, are then scored against this benchmark.

The report covers policies on agriculture, dams, fisheries, forestry, military industry and arms trade, mining, oil and gas, biodiversity, climate change, human rights, rights of indigenous people, labor right, tax and toxics.

A similar exercise is then undertaken for the bank performance on transparency and accountability on both institutional and deal level.

Finally, the report describes 30 controversial cases — referred to as Dodgy Deals — banks are involved in. They range from dams to mines, from controversial weapons to child labor, from oil pipelines to oil palm plantations, and from pulp mills to coal-fired power plants.

All findings are presented in a set of 45 bank profiles included in the report and on the website. A number of banks provided comments to the findings, which are included in the profiles.

— Selected Findings —

The report is packed with numerous observations and findings on the state of affairs on Banks’ credit policies. Amongst these findings are:

* 36 out of 45 banks have no policy on agriculture

* HSBC is the only bank receiving a maximum score of 4 for its dam policy

* Despite rapidly depleting fish stocks and widespread overfishing only one bank has developed a policy on the fisheries and seafood sector (Rabobank, score 3)

* Only 4 out of 45 banks have developed policies for the mining and the oil and gas sector, this despite the large adverse impact of these sectors on global sustainability (HSBC, ING, ABN AMRO, Barclays).

* Banks are becoming well aware of the need to develop a climate policy, with no less than 31 out of 45 banks issuing statements of sorts on their policies or practices. Despite this, the overall quality is poor, lacking clear commitments on emission reductions

* The human rights commitments of Rabobank, scored with a 3, stand in clear contrast to the often vague and aspirational policies of all other banks (scored 1 or 0).

* Not a single bank developed a policy on tax avoidance and tax havens. Only BBVA (Spain) states that it does not support activities related to tax evasion by its clients.

* 34 banks publish an externally verified annual sustainability report which meets the basic requirements of the GRI Sustainability Reporting Guidelines and its Financial Services Sector Supplements. Transparency and accountability on deal level remains poor, with few banks providing any detail on specific clients and transactions.

* As a group, US banks did not fare as well as their European competitors, whose policies tend to cover more issues and sectors.

* The three Chinese banks surveyed (ICBC, Bank of China, China Construction Bank) all had no publicly available environmental or social financing standards; only ICBC participated in the Carbon Disclosure Project.

Despite the progress made in development of credit policies, nearly all banks still find themselves involved in controversial deals, details of which are presented in the report.

— Comments —

“All taken together, Mind the Gap does not paint a rosy picture of the banking industry”, says Ulrike Lohr, coordinator of the project for BankTrack. “A few banks lead the way, too many fall behind; yet it is encouraging that banks pay increasing attention to the need to develop policies to deal with social and environmental risk way beyond the Equator Principles”

“The long list of Dodgy deals included in the report emphasize the need for stringent implementation of policies where they exist and the urgent need to develop such policies where they don’t ” adds Michelle Chan of FoE-U.S. “Implementing policies in the day to day business of a large banks is a huge challenge, but this is what civil society expects banks to do; to put their money where their mouth is.”

“Banks must realize that no matter how good their policies are, the public will judge their performance not on transactions that proceed smoothly behind the screens but on the one deal that stands exposed as Dodgy and in marked contrast to their stated sustainability principles,” said Andreas Missbach of the Berne Declaration; “transparency is key to any credible sustainability strategy”

“We hope to establish a clear benchmark with this report. Banks should see ‘Mind the Gap’ as an encouragement to move further and faster towards achieving best practice in all sectors they are involved in. Much remains to be done and we will check again early 2009 how things have progressed,” says Johan Frijns, coordinator of BankTrack.

— Further information —

The report is available at the BankTrack website.

The findings of the report are also presented on a designated section on the BankTrack website. The section includes profiles of all 45 banks, including individual findings, all relevant policies and other documents and known instances of involvement in controversial deals (Dodgy Deals).

Banks covered in the report are:

ABN AMRO, ANZ, Banco Bradesco, Banco do Brasil, Banco Itaú, Bank Mandiri, Bank of America, Bank of China, Barclays, BBVA, BNP Paribas, China Construction Bank, Citi, Crédit Agricole / Calyon, Credit Suisse, Deutsche Bank, Dexia, Fortis Bank, Goldman Sachs, HSBC, Industrial and Commercial Bank of China, ING, Intesa San Paolo, JPMorgan Chase, KBC, Merrill Lynch, Mitsubishi UFJ, Mizuho, Morgan Stanley, Nedbank, Rabobank, Royal Bank of Canada, Royal Bank of Scotland. Santander, Saudi American Bank, Scotiabank, Société Générale, Standard Bank, Standard Chartered, State Bank of India, Sumitomo Mitsui, UBS, UniCredit / HVB, WestLB, Westpac

— Contact–

Ulrike Lohr, BankTrack research coordinator, Wed 19: tel: +31-30-2334343, other days +49-221-760 6100 (home), [email protected]

Johan Frijns, BankTrack coordinator, Wed 19: cell: +31-6-12421667, tel 31-24-3220317 or later: +31-30-2334343 (BankTrack office), [email protected]

Michelle Chan, Friends of the Earth US (San Francisco), cell: +1-202-427-3000, [email protected]