Image source: "Scaling up impact measurement and management for banks," Banking for Impact working group
Several leading financial institutions, including UBS Group, DBS Bank, ABN AMRO Bank and Danske Bank, are hoping to accelerate the transition toward a sustainable economy by developing new impact-reporting standards that account for social and environmental factors.
As part of the Banking for Impact initiative announced Wednesday, the banks will team up with Harvard Business School and the Impact Institute to create a standardized method by the end of 2022 that tracks the impact of lending that isn't captured by traditional financial reporting.
The system will be based on Harvard Business School’s Impact-Weighted Accounts project, whose research of 1,800 companies found a correlation between negative environmental impacts and lower stock prices.
Harvard business professor and faculty co-chair of the project George Serafeim said, “The impacts of companies on people and the environment are affecting companies’ ability to attract talent, customers and investors, while exposing them to the actions of regulators and tax authorities. At the same time, banks’ shareholders, employees and customers demand transparency on the impacts of lending and financial products.”
Piyush Gupta, chief executive officer of Singapore-based DBS, said, “As the world increasingly begins to accept that the role of a corporation is to cater to several constituencies, not just shareholders, it becomes imperative to create a better scorecard, one that takes these ‘non-financial externalities’ into account.”
UBS chief executive officer Ralph Hamers said, “Measuring previously unreported elements will help the private sector tackle critical societal challenges such as climate change and inequality.”
Hamers said he believes the banking sector and its “ability to appropriately price social and environmental risks” is “well position to lead this transition.”
Source: Equities News