Context and objectives

On Thursday 25 July, following a six-month public consultative process, the United Nations Environment Programme Finance Initiative (the UNEP FI) has released the final versions of the UNEP FI Principles for Responsible Banking (the Principles) and their supporting framework documents.

The Principles have been developed by a core group of 30 founding banks through an innovative global partnership between banks and the UNEP FI. They provide a single framework for the development of a sustainable banking industry. In doing so, the Principles set out the banking industry’s role and responsibility in shaping a sustainable future and in aligning the banking sector with the objectives of the UN Sustainable Development Goals and the 2015 Paris Climate Agreement.

Furthermore, the Principles enable banks to embed sustainability across all their business areas, and to identify the potential to make the most impactful contribution to a sustainable world. They also position banks to leverage new business opportunities with the emergence of the sustainable development economy.

Institutions such as the European Banking Federation (EBF) have endorsed the Principles. The EBF has made a commitment to promote this initiative in Europe's banking sector via such strategies as the Markets4Europe initiative.

In order to demonstrate its commitment to a more sustainable banking system, Luxembourg Bankers Association (ABBL) has also unanimously approved and endorsed the Principles, thus paving the way for local implementation.

Principles for Responsible Banking

The following principles for responsible banking have been introduced to meet the varied needs and capacities of banks around the globe:

1. Alignment of the bank’s business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement, and relevant national and regional frameworks.
2. Impact and target setting, whereby banks should continuously increase their positive impacts while reducing the negative impacts on, and managing the risks to, people and the environment resulting from their activities, products, and services. To this end, banks will set and publish targets where they can have the most significant impacts.
3. Banks should work responsibly with their clients and customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
4. Banks are required to proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.
5. Commitment to these Principles should be implemented through effective governance and a culture of responsible banking.
6. Transparency and accountability, whereby banks should periodically review their individual and collective implementation of these Principles and be transparent about, and accountable for, their positive and negative impacts and contribution to society’s goals.

Click to enlarge the picture | src: UNEPFI. Principles Overwiew Infographic

Three-step implementation approach

As a first stage, banks that are interested in implementing the Principles, should sign the official Principles for Responsible Banking commitment document for Signatories.

The Principles then require signatory banks to take three key steps designed to ensure their effective implementation:

Impact assessment

• Analyze where the bank has significant positive and negative impacts on society, the environment, and the economy. Then identify where the bank can realize the greatest positive impacts and reduce significant negative impacts.

Target setting and implementation

• Set specific, measurable, achievable, relevant, and time-bound (SMART) targets that address the significant impacts the bank has identified, and work towards achieving them.

Accountability

• Within the bank’s existing reporting, banks should describe how they are implementing the Principles and provide an assured assessment of the progress that the bank is making.

The Principles are designed with the understanding that each bank is beginning this process from a different starting point. For this reason, banks will have 18 months to publish its first report, and four years to implement the steps above.

What’s next?

The official global launch of the Principles, during which CEOs will sign their bank’s commitment to the Principles, is scheduled for 22 September 2019. More than 100 banks from around the globe are expected to be signing up to the Principles on this day.

How can Deloitte help?

Deloitte’s advisory specialists and dedicated services will help you design and implement your business strategy in light of the future evolution of the regulatory framework and market trends.

Via our Regulatory Watch Kaleidoscope service, Deloitte can also help you stay ahead of the regulatory curve to better manage and plan upcoming regulations.

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