Responsible Investment Banking: Risk Management Frameworks, Sustainable Financial Innovation and Softlaw Standards PDF
Preview Responsible Investment Banking: Risk Management Frameworks, Sustainable Financial Innovation and Softlaw Standards
CSR, Sustainability, Ethics & Governance Series Editors: Samuel O. Idowu · René Schmidpeter Editor Karen Wendt Responsible Investment Banking Risk Management Frameworks, Sustainable Financial Innovation and Softlaw Standards CSR, Sustainability, Ethics & Governance SeriesEditors SamuelO.Idowu,London,UnitedKingdom Rene´ Schmidpeter,CologneBusinessSchool,Germany More information about this series at http://www.springer.com/series/11565 Karen Wendt Editor Responsible Investment Banking Risk Management Frameworks, Sustainable Financial Innovation and Softlaw Standards Editor KarenWendt ResponsibleInvestmentbanking Groebenzell Germany ISSN2196-7075 ISSN2196-7083 (electronic) CSR,Sustainability,Ethics&Governance ISBN978-3-319-10310-5 ISBN978-3-319-10311-2 (eBook) DOI10.1007/978-3-319-10311-2 LibraryofCongressControlNumber:2014952679 SpringerChamHeidelbergNewYorkDordrechtLondon ©SpringerInternationalPublishingSwitzerland2015 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation,broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionor informationstorageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilar methodologynowknownorhereafterdeveloped. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexempt fromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthisbook arebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsorthe editorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinorforanyerrors oromissionsthatmayhavebeenmade. Printedonacid-freepaper Springer International Publishing AG Switzerland is part of Springer Science+Business Media (www.springer.com) Foreword Corporate social responsibility (CSR) in its general sense expects all modern corporateentitiestohelpsocietytosolveallitssocial,economicandenvironmental problems regardless of whether or not they were instrumental in creating these problems in the first place. This we believe is a reasonable expectation which no one now argues with, even those who are still sceptical about the desirability of CSR. Behaving responsibly has never been more desirable in our world than it is todayformanyreasons.First,weliveinaglobaleconomywhereanylittlemishap inoneparticularnationstatemayresultinseriousconsequencesinallthe196coun- triesthatpresentlymakeupourworld,andtherecentfinancialcrisisistheevidence forsayingthat.Second,globalisationhasmeantthattradeandcultureoftheworld’s nationsarenowwellintegratedwithfreeflowofgoods,services,capitalandpeople betweenthesenations,andthismakesitevenmoreimportantforahighdegreeof responsibility to be demonstrated by corporate entities. However, there are still manyissueswhichhavestillnotbeenproperlyaddressedandstillsetbackprogress inthefieldofcorporatesocialresponsibilityinmanypartsoftheworld,andthiswe believeisunsustainable. Thefollowingissuesstillrequireactionsandconcertedeffortsbygovernments, international organisations, corporate entities, NGOs, the civil society, standard setters and so on to enable CSR to be fully embedded globally into business activities. Themainchallengestobeaddressedare: • Humanrightsabuses • Pollution • Unsustainableuseofnon-renewableresources • Poorinfrastructure • Briberyandcorruptpractices • Poorlabourandworkingconditions v vi Foreword • Poverty • Discrimination • Accesstohealthcareandfightagainstdiseases • Climatechange Fiftyyearsago,thesewereproblemspeopletalkedaboutbutdidlittleornothing tofindsolutions.Ithasnowbecomeapparentthattheseareissuesthatwillcontinue tostandinthewayofprogressinthefieldofCSRandglobaldevelopmentifthey arenotaddressedproperly. Banks and other financial institutions were directly implicated in the serious global financial downturn that besieged our world in 2007. Does this make com- panies in the implicated industries socially irresponsible? We certainly don’t believe that this is the case. All it means is that there are still some excesses and recklesspracticesprevalentinthewaybusinessiscreatedandconductedregardless ofwhetherornotCSRisinplaceandthatCSRhasnotyetbeenfullyintegratedinto the entire value chain and core activities of the financial services industry. Unsustainable business practices and models need curbing, and failing to do this might result in an even more serious and damaging financial crises than the one which we witnessed nearly 7 years ago and with the impacts still lingering. Our world economy will not sustain a reoccurrence of this. Banks and other financial institutions have a fiduciary obligation towards their customers regardless of whether these customers are depositors, investors or borrowers. Customers have impliedlyputtheirfaithandtrustinthesefinancialinstitutionsandrelyonthemto act at all times in their best interests, and a very high degree of responsibility is therefore required. Simultaneously, financial institutions have fiduciary duties towards society. This is exemplified by the United Nations Guiding Principles on HumanRights.Financialinstitutionshavetorespecthumanrightsinbusinessand proactivelyensurethattheyarenotinvolvedinsilentcomplicitywithothermarket playersinhumanrightsbreaches. The Equator Principles which has been revised twice and now in their third edition, we believe, need widening to encompass lending in general terms. Mini- mum standards for due diligence are not only desirable for assessing lending for projectsbutforalllendingandborrowingdecisions.Webelievethatasthingsstand inthisarea,thereisatoonarrowfocus.Likewise,riskmanagementisnotenough. Weneedapositivevisionforbankingandorientationtowardspositiveimpactsand sharedvalues. Ourworldwouldshutdownwithoutbanksandfinancialinstitutions,wecannot functionwithoutthem,butirresponsibleexcessesandunsustainablebonusculture willunderminetrustinbankingandfinancialinstitutionsandassuchdomoreharm thangoodtocitizensintheglobalvillageifsustainabilityisnotatthecoreofwhat these institutions do. In purview, sustainability needs to define strategies and actionsoffinancialinstitutions.Thechaptersinthisbookhavecompetentlyampli- fied that a different banking approach is possible, and they have explored why issues relating to the triple bottom line—social, environmental and economic Foreword vii dimensions—mustbeembedded intocorporatestrategies. Thebookisawelcome additiontothecorporateandacademicworld,andwerecommenditunreservedlyto allcitizensoftheworldregardlessoftheirindustryofoperations. Finally,wecongratulateKarenWendtforassemblingtheseworld-classthoughts byworld-classauthorsontheseissuesofglobalimportanceatthiscriticalpointof thetwenty-firstcentury. London,UK SamuelO.Idowu Cologne,Germany Rene´ Schmidpeter ThiSisaFMBlankPage Introduction for Responsible Investment Banking Book Mainstreaming sustainable finance into business decision-making is becoming an increasinglyattractiveprospectforfinanceinstitutionsworldwide.Accessing new markets for financial mechanisms, creating positive returns for more sustainable products and services and meeting a rising demand for capital financing for environmentalsolutionstoclimatechangethreatsarebutafewoftheopportunities that are being seized by finance institutions as they reduce their exposure to economicinstabilityandinvitemoresustainablereturnsontheirinvestments. As recently highlighted in the UNEP’s Global Environmental Outlook 5 For Business Report, the finance sector is well positioned to positively influence the behaviour of businesses from all sectors of the economy. It is estimated that as muchasUS$1trillionperyearforthenextfewdecadeswillberequiredtoaddressa range of environmental impacts, providing the finance sector with an unprece- dented opportunity to finance a low-carbon, resource-efficient and sustainable pathwaytoagreeneconomy. Moreover,byensuringthatfinancialservicesandtransactionsareconductedin accordancewiththeprinciplesofsustainabledevelopment,financeinstitutionswill also be enhancing transparency on client companies’ environmental and social impacts,andprotectingthemselvesfromlegalliabilitiesandreputationaldamage. This wasa resoundingmessage at UNEP Finance Initiative’s(FI) 2013Global Roundtable in Beijing, where over 400 participants, including policymakers, reg- ulatorsandrepresentativesfromacademia,civilsocietyandthescientificcommu- nity,discussedwhatittakestorealignthefinancialsystem.Toillustratethevalueof cooperativeapproaches,afewexamplesareoutlinedbelow. Regulators: Creating Enabling Environments Forfinancialinstitutionstomainstreamsustainabilityintheiroperations, andthus influence the behaviour of the private sector at large, an enabling regulatory environment is essential. Sustainable finance frameworks are emerging ix
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