Banks account for their performance on CSR

Barclays, Abbey National and Northern Rock are among the best performing banks on environmental and ethical issues, according to a report by the Ethical Investment Research Service. Allied Irish Bank and Bradford and Bingley have yet to demonstrate that they take corporate social responsibility seriously.

The financial sector has been one of the slowest to address environmental and ethical risks (ENDS Report 332, p 12 ). Many have yet to get to grips with the issue but, according to a report by ethical researchers EIRIS, performance is improving steadily.

EIRIS researched the performance of 13 banks on issues across the corporate social responsibility (CSR) agenda, including environment, human rights, equality and community involvement. The work drew on information in banks' environmental and CSR reports and responses to questionnaires.

The findings are important on two levels. EIRIS points out that banks, along with telecoms firms, are already important holdings within many ethical funds. Meanwhile, good risk management, especially in lending, is important to protect a bank's reputation and commercial position.

EIRIS says that the banks with the best overall performance are Abbey National, Barclays, Co-operative Bank, Lloyds TSB, Northern Rock and Royal Bank of Scotland. Although Co-operative Bank was seen as the best in the sector, it is unusual in having made a business out of its ethical stance. More interesting is the performance of the mainstream banks.

Barclays is one of the most improved on environmental issues since EIRIS' first survey of the sector. Two years ago, Barclays' management systems and reporting were described as "weak" and "undeveloped", respectively. Now, its CSR policy is seen as "good" and its management systems and reporting as "exceptional".

Last year, Barclays became the first high street bank to achieve certification to the environmental management standard ISO14001. Its 2002 CSR report says that 80% of its businesses worldwide have now achieved the standard.

Barclays' environmental risk management unit screens applications for commercial loans to identify and mitigate risks. Last year, there was a 19% increase in the number of lending proposals referred to the unit from the bank's credit teams worldwide. Barclays also reduced its CO2 emissions by over 10% in 2002.

Abbey National is seen by EIRIS as having made a "significant improvement" since 2001, with "good" policies and "exceptional" management systems and reporting. Its 2002 CSR report describes how it incorporated environmental issues into its risk management processes. Lending and investment is monitored by a dedicated group which is working with business areas to review and improve risk-control processes.

Abbey also reports on progress in reducing its direct impacts. It has cut CO2 emissions from energy use in line with a 10% reduction target. It also cut water use from over 271,500m3 in 1999 to 185,500m3 in 2002. The bank now has 50 video-conferencing facilities at head office, reducing the need for travel.

Northern Rock says that its portfolio of mortgage loans gives it relatively little exposure to risks associated with brownfield development. Nevertheless, the bank has an appraisal process to identify areas that require environmental risk assessment.

Northern Rock also buys 50% of its energy from renewable sources and aims to increase this to 100%. However, CO2 emissions increased by 25% in 2002, partly because of new office developments.

The performance of some banks has a long way to go. Bradford and Bingley is seen as generally "weak", with little demonstrable improvement since 2001.

Mike Harwood, Bradford and Bingley's CSR manager, accepted that EIRIS' assessment was a "fair reflection" of its performance. The company has been gathering performance data for the past two years which will be published next March, along with improvement targets, in a first CSR report.

Irish banks operating in the UK have made little progress. Bank of Ireland, which owns Bristol & West, is now planning to review its impacts.

EIRIS says that Allied Irish Bank's CSR management is "undeveloped", with no polices or systems to manage environmental issues. A spokesman for Allied Irish refused to comment.

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