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The New Environmentalists: Bankers, Insurers and Accountants (oh my!)
Gil Friend, 7 Aug 05

Gil Friend is a systems ecologist and business strategist, and is the CEO of Natural Logic, an environmentally-focused strategy, design and management consultancy. He writes occasional essays on sustainable business for our Sustainability Sunday feature.

There's growing sustainability action in the world of finance -- from HSBC and Wells Fargo and UNEP to the ever-watchful Rainforest Action Network.

And from the smaller, but equally feisty Berkeley Ecology Center, which worries, in the summer issue of Terrain, of Rhetoric Overload, among other things:

There is a danger that human intervention will accelerate and intensify natural climate changes to such a point that it will become impossible to adapt our socio-economic systems in timeĀ… The human race can lead itself into this climatic catastrophe-or it can avert it."

No, that isn't Greenpeace talking. It's Swiss Re, one of the largest insurers in the world. I don't know about you, but I have some rules of thumb that guide me in my daily life. One of them is that when actuaries start spewing incendiary rhetoric, be very afraid. Because the next thing you know, some tart from a place called Babylon shows up at your door, asking for a place to stay "for a few days."

What's going on? Let's scan.

The CSIRO and the University of Sydney 'Triple Bottom Line Analysis of the Australian Economy' (previously noted by WorldChanging) argues that

[B]anks occupy a pivotal position in decision-making in business operations, national affairs and lifestyles of people. Banks could use this central influence to the advantage of the environment if they assessed a broader set of risk issues when they lent money - for example, by giving concessional interest rates to businesses that perform well across the triple bottom line, or domestic houses that had ten star energy and water ratings.

Well, this week, ClimateBiz reports, HSBC bank -- the world's second largest bank -- has set ambitious reduction targets for air emissions, waste.

HSBC plans to 'cut its CO2 emissions by an average of 5%, water and energy by 7% and landfill waste by 8%, across 90% of its operations by the end of 2007.'

At first blush, I wasn't sure I'd call HSBC's targets 'ambitious'. (See How High the Moon: The Challenge of 'Sufficient' Goals) On the other hand, for these results are to be achieved in three years, across a property portfolio comprises some 10,700 buildings, including branches, offices, data and service centres and residences -- is no small feat, and one that HSBC appears to be approaching with a serious and thoughtful methodology, including:

  • Tak[ing] a detailed view of the future shape and size of the portfolio at the country level including future upgrades, specific projects and continuing management improvements.
  • allowing local teams to calculate their own targets using a consistent methodology will lead to greater ownership and a greater commitment to deliver
  • develop[ing] an environmental evaluation methodology for use across the Group.
  • identif[ying] financial, energy, waste, water and CO2 reductions for each intended initiative over the next three years... separated into three broad categories: capital expenditure, planned maintenance and repair.
  • provid[ing] a mechanism for developing a business case and estimating payback by comparing existing measures with environmental initiatives.

I'll be curious to see what HSBC might be aimed at (but not yet ready to talk about publicly) beyond this three year window -- and how they plan to track and drive performance toward those goals.

Last month Wells Fargo Bank joined the bandwagon of major financial institutions -- including giants JPMorganChase, Citibank and Bank of America -- in issuing a 10-Point Environmental Commitment.

Wells says it will:

  • provide $1+ billion in lending, investments, and other financial commitments over the next five years to environmentally-beneficial business opportunities
  • ensure the Company's environmental decision-making is thoughtful and thorough [by] adopt[ing] by year-end 2005 new environmental due diligence procedures and practices for middle-market and large corporate customers in environmentally-sensitive industries.
  • adopt the Equator Principles
  • expand opportunities for ... energy-efficient mortgage products and ... encourage the construction and development of green homes
  • increase efforts to conserve resources in its operations ... [and] collect data ... to track and help minimize the effect on the environment from its operations.
  • Senior managers will support and sponsor the Company's environmental commitment and explore business development opportunities.
  • create an external Environmental Advisory Board to guide the Company's efforts
  • increase corporate contributions of financial, human and social capital to selected environmental non-profit groups
  • incorporate environmental commitments into the Company's Vision and Values
  • communicate annually its achievements in meeting these commitments.

Rainforest Action Network (RAN) -- which called JPMorgan Chase's new environmental policy, released in April, 'a tipping point in the private financial sector, where the three largest banks have now publicly recognized that a sound long-term economic strategy relies on embracing environmental sustainability.' -- has accused Wells Fargo of taking "a huge step backwards" in its new environmental policy - reversing recent progress towards a sustainable financial sector.

In contrast, as RAN noted in a harsh critique of the Wells policy,

Wells Fargo's press release had no policy to back it up, offered no implementation details and fell far short of industry best practices recently set by Bank of America, Citigroup and JP Morgan Chase. In stark contrast to policy announcements made by fellow CEOs, Wells Fargo chief executive Richard M. Kovacevich was notably AWOL from the statement leaving stakeholders feeling deserted by his lack of leadership on a range of urgent environmental and social issues.

[And, from the Department of How Can This Be?]:

Wells Fargo's "environmental commitment" made no mention of global warming.

I guess while love may be all you need, policy ain't. The proof of the pudding, as always, will be in the tasting, for Wells and HSBC -- and all the signatories to the UN Environment Programme's Finance Initiative, which will be holding its Global Rountable in New York in late October.

And the proof lives in three Ps:

- Policy, with firm commitment from the top to explicit - and compelling - goals;

- Program, that embeds policy into the activities, infrastructure and incentive systems of the organization;

- Performance, the results in the real world of impacts on the regenerative capacity of the living systems that sustain the human economy, and on the shareholders and financial viabilty of the institutions arged with delivering the goods. (The fifth 'system condition', for all you Natural Step fans out there.)

-Gil Friend

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Comments

good post.

Insurance agents & undrwriters are the easiest nuts to crack given how they bleed (financially + business model viability) when disasters strike & get more unpredictable. For years they've been compiling actuarial data & risk assessments on likely climate change effects, etc. WCers could be doing more in conjunction with them.


Posted by: Janelle on 8 Aug 05

I totally agree about the role that insurance companies could play in changing perspectives. It seems from my very superficial research that some awareness is there in the UK but not much to be seen in the US to date.
This is quite a revealing document from last year from the Association of British Insurers
- just not clear what they've done since:
http://www.abi.org.uk/Display/File/Child/239/climatechange2004.pdf


Posted by: Jeremy on 8 Aug 05

RE: SWISS RE

http://www.theclimategroup.org/index.php?pid=428


Posted by: Jeremy on 8 Aug 05



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