Consortium Proposes to Create Impact Reporting Rules for Banks

Harvard Business School, Impact Institute, ABN AMRO, Danske Bank, DBS and UBS aim to create new social and environmental impact reporting rules for banks.

Banking for Impact, a leading financial consortium, has proposed new social and environmental impact reporting rules for banks, which it says will accelerate the transition to a sustainable economy.

Banking for Impact includes Harvard Business School, Impact Institute, ABN AMRO, Danske Bank, DBS and UBS as consortium members.

Harvard research has revealed a significant relationship between negative environmental impacts and lower stock market valuations, underscoring the strong business case for greener business models.

Financial firms need new reporting rules that pull positive and negative externalities like job creation and pollution into standard practices to provide a well-rounded picture of how they create true value, the Banking for Impact consortium said in a statement on Wednesday (30 June).

To that end, Banking for Impact aims to create new reporting standards for financial firms known as impact measurement and valuation (IMV), which it says will measure environmental and social effects of all banking activities and fuel sustainable economic decisions.

Banking for Impact has also published a Vision Paper outlining plans to build an IMV approach that includes the quantification, valuation, attribution and aggregation of impacts for the financial sector – standards that do not yet exist for financial firms.

  • Quantification is the process of measuring the outcomes of activities in quantitative units. (e.g. number of jobs created, amount of CO2 emitted)
  • Valuation places different types of impact into the same context (monetary) so that they may be compared.
  • Attribution seeks to transfer a portion of the impact from facilitation of client activities to banks to help determine how responsible it is.
  • Aggregation involve combining impact information to enable comparability and decision-making.

The consortium is calling on other financial firms to join its ranks in reshaping the economy with sustainability at the core. The call to action has already received support from leaders in finance, academia and the non-profit sector.

“Impact transparency will focus banks on providing solutions for people and planet, rather than financing the creation or aggravation of problems,” said Sir Ronald Cohen, Chairman of IWAI and the Global Steering Group for Impact Investment. “This will redefine banking success to include both profit and impact performance, improving lives and the planet.”

UBS Group CEO Ralph Hamers said: “The world economy needs a market-based system where social and environmental impacts are just as transparent as financial profit metrics. Measuring previously unreported elements will help the private sector tackle critical societal challenges such as climate change and inequality.”

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