When discussing the current environmental onslaught developing around us, we rightly focus on incompetent regulators and greedy developers. It is about time that we also address the role of the banks: they make environmental degradation possible as they generally finance the development works which cause the said degradation. As a result, it is about time that banks too shoulder their responsibility for the ever-increasing environmental degradation.
Going through the annual reports of the major local banks it is more than clear that banks are only interested in profits. They engage in continuous greenwashing in order to try and minimise their reputational damage.
The banks portrait themselves as being there to help. They regularly sprinkle some cash to sponsor worthy causes. Notwithstanding this artificial sensitivity towards various sectors of the community, profits always take a priority over people in the banks’ operations. Financing of development projects are a case in point. Banks rarely indicate in their public statements and reports whether and to what extent they factor in environmental and social considerations when deciding whether to make finance available for any particular development project.
HSBC, for example, refers to the applicability of the Equator Principles in its latest annual report. The Equator Principles are a risk management framework adopted by a number of financial institutions “for determining, assessing and managing environmental and social risk in projects.” They are intended to provide a minimum standard for due diligence and monitoring to support responsible risk decision-making. Among other matters the Equator Principles deal with stakeholder engagement and require effective action dealing with environmental and social risks by developers who seek financial facilities from banks.
HSBC has not to date publicly reported on the matter as to the practical manner in which it applies these principles in Malta. We have yet to see how the bank establishes that environmental and social risks have been assessed and specifically the extent to which the bank ensures that proper stakeholder engagement has been carried out by its developer clients!
The Bank of Valletta annual report on the other hand gives us its take on the UN’s Sustainable Development Goals, describes at some length the worthy causes which it supports and explains the action taken to ensure that its branches are energy efficient and environmentally friendly. It also describes its services which facilitate client access to finance environmentally friendly initiatives. The Bank of Valletta Annual Report does not make any reference to the Equator Principles.
Lombard Bank in its latest annual report emphasises that it takes great care in minimising the environmental impacts of its operations. It also stresses its extensive contributions and initiatives to a number of worthy causes. Lombard Bank does not refer to the Equator Principles or any other benchmark or standard which it applies when dealing with its developer clients.
On an EU level the European Central Bank has very recently approved a “Guide on Climate-Related and Environmental Risks” applicable to the banking sector throughout the European Union as from this year. As its title indicates it is primarily concerned with climate-related risks.
Banks have a responsibility to ensure that when financing development projects, the finance made available is not utilised to cause or accelerate environmental and/or social damage. Whenever such environmental and/or social damage arises it is not just the developers and the regulators which should shoulder responsibility for the said damage. Even banks should be held to account. They make it possible! Banks should pay the price whenever they are collaborators in the ever-increasing environmental degradation. They make it happen!
An architect and civil engineer, the author is Chairperson of AD + PD - The Green Party in Malta. [email protected] , http://carmelcacopardo.wordpress.com