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Feb 18, 2021

Mazars Study Reveals Progress on Sustainable Banking Finances Globally

Responsible banking practices

Responsible banking practices

  • 37 banks located in Africa, the Americas, Asia-Pacific and Europe were assessed to identify best practices and trends in how they manage risks related to climate change, and broader social and government issues
  • Banks have made progress on all dimensions of sustainable finance assessed since the 2020 edition of the same study
  • The average percentage of banks that are developing a supply of responsible products is 82% - compared to 47% in the previous year.

Mazars, an international tax, audit and consulting firm, launched the 2021 edition of its benchmarking “Responsible banking practices”. The global study assesses sustainability practices at 37 of the world's largest banks[1] located in Europe, Africa, the Americas and Asia Pacific.

The analysis shows that the banking sector widely recognizes the opportunities and risks related to sustainability issues. However, the full implementation of practices designed to achieve sustainable goals is still under development.

Luís Gaspar, Managing Partner of Mazars in Portugal, confirms that this is a trend also seen in the national market: “We are facing a transformation of the financial culture, as this type of concern becomes more and more urgent. The expectation is that all organizations, particularly those that have a significant impact on the economy or an activity of public interest, will implement processes that ensure respect for environmental and social issues. This is visible in the clients of the financial sector with whom we work in Portugal and it becomes something to consider when we consider their needs and the solutions to be made available ”.

Global conclusions: banks have made significant strides in sustainability 

The overall analysis shows that the majority of banks assessed:

  1. They promote a sustainability culture and allocate responsibility for this matter to more senior functions. On average, 74% of banks have already implemented measures that promote a culture of sustainability and adapted government structures, compared with 49% in the previous year. However, the integration of ESG skills (Environmental, Social, Governance) in the selection of the composition of governments and the measurement of the performance of ESG criteria in the definition of remuneration continue to be uncommon practices.
  2. Make a commitment to SMART sustainability goals, with prevalence of goals related to the environment. The methodologies for strategic alignment with the Paris Agreement have gained momentum: around 51% of banks are testing the PACTA methodology to align their financial portfolios with the objectives of the Paris Agreement. However, this has not yet been reflected in banks' official commitments to climate neutrality.
  3. Have more advanced risk management practices for climatic risks than for broader ESG risks - with most built-in climate scenario analysis capabilities. However, it remains a challenge to measure the financial impact of climate change on banks due to the lack of quantitative information. Only 22% of banks provide quantitative data on the materiality of climate risks.
  4. Implement standards of sustainability reports, mainly with a focus on climate objectives, with the recommendations of the CDP and TCFD being the most common. In terms of metrics and goals, GHG emissions are the most reported. One of the main challenges of the reports remains Scope 3 GHG emissions; only 11% of banks disclose information related to their financing activities.
  5. They have a more mature business offer than the offer to private customers, and climate and environmental products are more prevalent than economic and social products. For example, 78% of banks have developed an offer of green bonds, while only 32% developed green products for private customers. Comparing banks' supply remains a challenge due to the lack of standardized reporting structures.

Mazars Partner Leila Kamdem-Fotso says: “There is no doubt that banks are making their practices more sustainable and that they have been making progress since our first study. The results are encouraging, but also reveal some work to be done. Banks need to implement relevant practices, particularly those related to climate risk management and disclosures, if they are to comply with sustainability objectives. One way to do this is to improve methodologies and better quantify the climate-related impacts incurred in your reports. Positive developments in this area may allow banks to play their part fully in shaping a more sustainable future for the global economy. ”

Improvements in all areas: 2021 vs 2020

Comparing the recent results of the study “Responsible banking practices” with our 2020 assessment, banks have made progress related to sustainable finance in all dimensions analyzed:

  • The average percentage of banks that have developed a supply of responsible products is now 82%, compared to 47% the previous year.
  • Banks that have promoted a culture of sustainability and updated their governance structures accordingly have increased by half (51%), although there is a similar increase (45%) in the percentage of banks that aligned their disclosures with ESG reporting standards.
  • There are clear lags in areas such as the incorporation of ESG and climate criteria in risk management structures and the implementation of sustainability strategies (increase of 22% and 20%, respectively).

Methodology

The Mazars 'Responsible Banking Practices' Benchmark study assesses the sustainability practices of a sample of 37 banks. We focused our analysis on banks located in Africa, the Americas, Asia-Pacific and Europe. The selected banks are the largest in their geographies according to total assets.

Most of the selected banks have shown a significant interest in sustainability and climate change by implementing structures, participating in the United Nations Environment Program (UNEP FI) Financial Initiative and / or committing to the UNEP FI Principles for Responsible Banking (PRB). This study is based on previous Mazars reports published in 2020: “Responsible banking practices, benchmark study"and "How Banks Are Responding to the Financial Risks of Climate Change".

About Mazars 

Mazars is an international and integrated partnership, specialized in auditing, accounting, consulting, taxation and legal services *. It operates in more than 90 countries and territories worldwide and has the experience of over 42,000 professionals - 26,000+ in the Mazars integrated partner and 16,000+ via the Mazars North America Alliance - to support customers of all sizes at all stages development.

https://www.mazars.pt/ | https://pt.linkedin.com/company/mazars-portugal | https://pt-pt.facebook.com/MazarsPortugal

[1] The selected banks are the largest in their respective geographies, based on total assets.

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