26 November 2018: The UN Environment Programme Finance Initiative (UNEP FI) and a group of banks launched a global consultation on a draft set of Principles for Responsible Banking. The six principles aim to align banks’ strategies with societal goals as articulated by the SDGs and Paris Agreement on climate change.

The six-month consultation was launched during UNEP FI’s Global Roundtable, held from 26-28 November 2018, in Paris, France. The draft principles seek to provide a single, comprehensive framework for embedding sustainability at the strategic, portfolio and transaction levels, and addressing how banks can provide value not only for their customers, clients and investors, but also broader society. The principles currently cover the following areas:

1. Alignment: ensuring that business strategy is consistent with and contributes to individuals’ needs and society’s goals, as expressed in the SDGs and Paris Agreement
2. Impact: continuously increasing positive impacts while reducing negative impacts on—and managing the risks to—people and environment resulting from activities, products and services
3. Clients and Customers: encouraging sustainable practices and enabling economic activities that create shared prosperity for current and future generations
4. Stakeholders: proactively and responsibly consulting, engaging and partnering with relevant stakeholders to achieve society’s goals
5. Governance and Target Setting: implementing the principles through effective governance and demonstrating ambition and accountability through the setting of public targets that relate to banks’ most significant impacts
6. Transparency and Accountability: periodically review individual and collective implementation of the principles and be transparent about, and accountable for, positive and negative impacts

The principles require that signatory banks set targets on their most material issues, and that they report publicly on both positive and negative impacts. The principles already have the backing of RobecoSAM, an international investment company whose Corporate Sustainability Assessment (CSA) evaluates companies’ sustainability practices and helps determine whether they will be listed on the Dow Jones Sustainability Indices (DJSI). RobecoSAM Co-CEO Daniel Wild said, “banks that want to be best in class in the CSA and members of the DJSI should therefore seek to align with this new global standard.”

For banks that seek to implement and operationalize the principles, UNEP FI offers guidance documents, which outline the rationale behind each principle and identify resources to which banks can refer. Among the suggested steps for getting started, on Principle 1 (Alignment), for example, UNEP FI lists: outreach to and engagement with stakeholders, conducting a materiality assessment to identify where and how banks’ portfolios and service offerings can generate positive impacts and mitigate negative ones, and developing long-term targets, key performance indicators (KPIs) and measurement systems on the bank’s impact areas, in line with principle 5 (target setting).

Once the principles are finalized, UNEP FI plans to launch a dashboard through which banks can self-assess and report where they stand on implementing the principles. The banking principles will complement existing Principles for Responsible Investment (PRI), which PRI Chair Martin Skancke noted have “helped drive the integration of environmental, social and governance considerations into investor decision-making.” [UNEP press release] [Draft Principles for Responsible Banking] [Implementation guidance]