Banks behind controversial projects
Swiss banks: From leaders to laggards (26.01.06)
BankTrack / WWF UK press conference, Davos January 26th 2006
Dr. Andreas Missbach, Private Finance Programme, Berne Declaration / BankTrack
Dr. Andreas Missbach, Private Finance Programme, Berne Declaration / BankTrack
In the nineties the Swiss banks where among the first to consider environmental issues. They started to look at environmental risks in their domestic credit portfolio and prepared environmental reports. Those reports touched only issues like the banks own energy consumption and the use of recycled paper. They did not look into their portfolio and their clients environmental performance. But unlike the majority of banks they at least realized that there is such a thing as environmental issues.
Looking at the findings of our report it is obvious that Credit Suisse and UBS by now are positioned far behind comparable international banks. Credit Suisse scores D- (0.54) and UBS E (0.08). UBS scored only in one category, they received a rating of 1 in labour rights issues. And this is only because they are, together with Credit Suisse and many other banks a signatory to the UN Global Compact. By endorsing the Global Compact, many banks have committed to apply the International Labour Organizations four core labour standards and eight labour conventions to their own corporate operations – but none has developed a specific labour policy applicable to its lending operations. Exactly how signatory banks guarantee that their operations meet these core standards remains a mystery, as no supporting policies exist or are publicly available.
The advantage of Credit Suisse over UBS are largely windfall gains, stemming from the fact that Credit Suisse endorsed the Equator Principles and UBS did not. Being an Equator Bank earns scores in the following areas: Indigenous people (1), dams (2), Transparency and Environmental and Social Management Systems (1). But as the low scores indicate, the specific requirement for Equator banks on the issues of indigenous people and dams fall short of international standards and best practices. This is also the case for the crucial issue of transparency.
The lack of transparency is accentuated with the Swiss banks. While some banks developed their standards in consultation with NGO’s and published the results on their websites, Credit Suisse was not willing to share the forest policy they apparently have, with the authors of this study. The same is true for UBS where the Berne Declaration without success tried to find out more about their internal standards and how they apply them. We all know that Swiss banks are very discrete entities, but it makes no sense to extend the secretiveness to social and environmental issues. It would be almost an ideal world if banks would compete with each other on the quality of their environmental and social standards, today those issues haven’t even reached their core business. Therefore there is only one plausible reason for hiding standards and policies: their weaknesses could be exposed.
Implementation matters
Even where banks have the best policies, little information is available about their systems or practices for implementation. It was therefore impossible to assess, let alone compare, their efforts at implementation. We know anecdotally that significant efforts are being made. But we also know that even banks with relatively strong policies continue to support transactions with significant environmental or social impacts.
One of the most controversial and worrying projects that are currently in the phase of being financed by Swiss and other banks is Shells «Sakhalin II» oil and gas project in Russia. Independent experts conclude the project threatens the critically endangered Western Gray Whale with extinction. The on-shore Pipeline construction is slashing across over 100 wild salmon rivers and spawning beds, damaging the habitat of keystone species that provide primary income for one third of Sakhalin island residents, and that are crucial to the indigenous people’s culture and livelihoods. Dredging wastes of the construction of an LNG plant and terminal are being dumped into Aniva Bay threatening fish stocks and the illegal construction of a pier occurred despite the importance of this fisheries-rich water to the island’s economy. In addition, there is no oil spill response plan in place that is proven to work in dangerous sea ice conditions during the harsh winters on Sakhalin.
Credit Suisse is the financial advisor to this highly damaging projects and not less than six Equator Banks are on the shortlist of potential lead arrangers: Mizuho, Hypovereinsbank, ING, The Royal Bank of Scotland, West LB and ABN AMRO. That ABN AMRO, the bank that together with HSBS Group reached the highest overall score in our study, is considering financing Sakhalin II shows how far the banking sector still has to go, when it comes to implementation.
As we have now shifted from a “trust me” to a “show me” world in which corporations are the least trusted of institutions, banks should urgently adopt a reporting framework that demonstrates that they are actually implementing their policies in ways that make a meaningful difference to people and the planet. Only then will outside stakeholders gain confidence that the banking sector’s policy pronouncements are more than just rhetoric.
The full report is available for download at www.banktrack.org
Looking at the findings of our report it is obvious that Credit Suisse and UBS by now are positioned far behind comparable international banks. Credit Suisse scores D- (0.54) and UBS E (0.08). UBS scored only in one category, they received a rating of 1 in labour rights issues. And this is only because they are, together with Credit Suisse and many other banks a signatory to the UN Global Compact. By endorsing the Global Compact, many banks have committed to apply the International Labour Organizations four core labour standards and eight labour conventions to their own corporate operations – but none has developed a specific labour policy applicable to its lending operations. Exactly how signatory banks guarantee that their operations meet these core standards remains a mystery, as no supporting policies exist or are publicly available.
The advantage of Credit Suisse over UBS are largely windfall gains, stemming from the fact that Credit Suisse endorsed the Equator Principles and UBS did not. Being an Equator Bank earns scores in the following areas: Indigenous people (1), dams (2), Transparency and Environmental and Social Management Systems (1). But as the low scores indicate, the specific requirement for Equator banks on the issues of indigenous people and dams fall short of international standards and best practices. This is also the case for the crucial issue of transparency.
The lack of transparency is accentuated with the Swiss banks. While some banks developed their standards in consultation with NGO’s and published the results on their websites, Credit Suisse was not willing to share the forest policy they apparently have, with the authors of this study. The same is true for UBS where the Berne Declaration without success tried to find out more about their internal standards and how they apply them. We all know that Swiss banks are very discrete entities, but it makes no sense to extend the secretiveness to social and environmental issues. It would be almost an ideal world if banks would compete with each other on the quality of their environmental and social standards, today those issues haven’t even reached their core business. Therefore there is only one plausible reason for hiding standards and policies: their weaknesses could be exposed.
Implementation matters
Even where banks have the best policies, little information is available about their systems or practices for implementation. It was therefore impossible to assess, let alone compare, their efforts at implementation. We know anecdotally that significant efforts are being made. But we also know that even banks with relatively strong policies continue to support transactions with significant environmental or social impacts.
One of the most controversial and worrying projects that are currently in the phase of being financed by Swiss and other banks is Shells «Sakhalin II» oil and gas project in Russia. Independent experts conclude the project threatens the critically endangered Western Gray Whale with extinction. The on-shore Pipeline construction is slashing across over 100 wild salmon rivers and spawning beds, damaging the habitat of keystone species that provide primary income for one third of Sakhalin island residents, and that are crucial to the indigenous people’s culture and livelihoods. Dredging wastes of the construction of an LNG plant and terminal are being dumped into Aniva Bay threatening fish stocks and the illegal construction of a pier occurred despite the importance of this fisheries-rich water to the island’s economy. In addition, there is no oil spill response plan in place that is proven to work in dangerous sea ice conditions during the harsh winters on Sakhalin.
Credit Suisse is the financial advisor to this highly damaging projects and not less than six Equator Banks are on the shortlist of potential lead arrangers: Mizuho, Hypovereinsbank, ING, The Royal Bank of Scotland, West LB and ABN AMRO. That ABN AMRO, the bank that together with HSBS Group reached the highest overall score in our study, is considering financing Sakhalin II shows how far the banking sector still has to go, when it comes to implementation.
As we have now shifted from a “trust me” to a “show me” world in which corporations are the least trusted of institutions, banks should urgently adopt a reporting framework that demonstrates that they are actually implementing their policies in ways that make a meaningful difference to people and the planet. Only then will outside stakeholders gain confidence that the banking sector’s policy pronouncements are more than just rhetoric.
The full report is available for download at www.banktrack.org
