Home Banking Sustainability in the Banking Industry: Mere Marketing Gimmick or Credible Commitment?

Sustainability in the Banking Industry: Mere Marketing Gimmick or Credible Commitment?

by internationalbanker

By Martina Scapin, Country Manager, Switzerland, Lundquist




Sustainability, nowadays, is big business for the banking industry. Just take a look at the corporate websites of some of the largest banks in the world, and you’ll see grand sustainability claims guiding their corporate communications right from their homepages. HSBC leads with the news that it’s just been named best for sustainable finance; Lloyds Bank kicks off with its slogan “helping Britain prosper”; and one of Nordea Bank’s leading stories on its page at the time of writing was “Working on diversity and inclusion—every day, all year round”.

Driven by the in-crowd, billionaire philanthropists and their Millennial kids, sustainable investing has taken right off (according to McKinsey, it’s been growing by 17 percent per year and now stands at $23 trillion),making sustainability communications a powerful weapon for the biggest banks. But how much of this is just branding, and how much is actually translating into real action in the form of credible strategies and credible communications?

We take a closer look here.

Lundquist communications model: spotlight on the banking industry

Our research .future provides a unique vantage point from which to understand how sustainability is evolving in Europe, taking a close look at what is communicated in terms of content and information, how it is presented and how stakeholders are engaged across the corporate ecosystem.

In order to gauge how effectively companies are communicating on sustainability, we developed the Lundquist communications model, which offers a new way to understand how companies are positioned in relation to their peers and competitors based on their communications approach. Four “types” were developed:

Our research revealed that despite the efforts made, the banking sector still has a lot to do to become fully trustworthy on aspects related to sustainability. In fact, of the seven banks we looked at for the European portion of our .future research (based on the STOXX Europe 50), none made it into the “narrators” quadrant, the leading quadrant in our model. The majority (four) fell within the “traditionalists” quadrant, seen as the most dangerous area to be in; one landed within the “glitterati” quadrant; and only two (one at the cusp), ING and Intensa Sanpaolo, broke into the “explainers” quadrant.

This means that some of the top European banks (HSBC and BNP Paribas to name a couple) are still relying on technical and compliance disclosure, as opposed to distinctive communications to convey their sustainability commitments, strategies and targets. The sector is not helped by the fact that credible sustainability commitments seem a long way off when banks continue to be marred by scandals, such as the recent layoffs at Deutsche Bank and the money-laundering scandals that have plagued Danske Bank and Swedbank. In fact, of the nine sectors we examined in .future, the banking industry performed the poorest.

Integrated reporting: a reprieve in the battle for credibility?

Whereas online sustainability communications (examined by .future) is still a work in progress, the world of sustainability reporting may offer some reprieve for the banking sector. Our research Blurring Boundaries was developed to guide companies into a new landscape for sustainability reporting, one in which the traditionally clear confines between financial and non-financial topics are breaking down.

Findings from Blurring Boundaries revealed that an effective sustainability narrative starts with the development of a strategic approach to sustainability—in terms of principles, strategies and targets—well integrated into the business. A bank that uses integrated thinking is able to develop a reporting suite that reflects its business strategy.

Take Spanish bank BBVA (Banco Bilbao Vizcaya Argentaria, S.A.) as an example. The bank gathers all financial and non-financial information into a single (combined) document, with ample space given to ESG (environmental, social and corporate governance) topics, both in print and online. Italian bank Unipol, on the other hand, is a good example of a bank that presents a well-thought-out, integrated strategy through reporting. Its 2017 integrated report placed a strong emphasis on sustainability and governance and is directly connected to its business strategy. Swedish bank Nordea, on the other hand, uses its sustainability report to present a value-creation model that connects sustainability and business.

Toward communication utopia

But is reporting enough? Not really. Integrated reporting does not necessarily mean that the bank has an integrated strategy in place, and it also doesn’t mean that its commitment to sustainability is being communicated in the most effective way. It is also, if presented in the form of a report (although some banks are now also integrating these into their online comms), a vehicle that caters to a very specific audience: that of professional stakeholders.

Online communications, on the other hand, whether through corporate websites or social-media platforms, is a valued communications tool because it technically should facilitate easy access to credible information for a mass audience. For effective sustainability communications, this means providing tangible and credible targets and results based on strategic actions in a way that is easily digested and understood.

Two years ago, in International Banker, we wrote about banks’ flagging commitment to sustainability. Two years later, we see some improvement, but the need for more credible action remains. While it may be that sustainability has taken off commercially—via the lucrative returns provided by sustainable investing, smartly marketed by banks—we need to see more banks moving into the “narrators” quadrant to convince us that this commitment is also being taken seriously at the corporate communications level.

Time will tell.

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