The financial consortium proposes new sustainable reporting standards, Banking News & Top Stories
Banks can help the world move towards a more sustainable future by adopting standards that allow them to more fully report on social and environmental considerations, said a global consortium of financial institutions that includes Singapore’s DBS Bank.
A report released by the group, Banking For Impact, detailed its vision on Wednesday and outlined plans for how new reporting rules can be created for companies to measure their impact and value.
The alliance includes a unit of Harvard Business School, DBS, UBS Group, Danish Danske Bank, Dutch bank ABN Amro and Impact Institute, a social enterprise pioneering new standards in integrated reporting.
The report came about a month after the Monetary Authority of Singapore announced that it would allocate about US $ 1.8 billion (S $ 2.4 billion) of the country’s official foreign exchange reserves to five money managers. assets for climate-related investments. He will also consult with the financial sector later this year on mandatory climate-related disclosures.
The consortium said: âFinancial firms need new reporting rules that integrate positive and negative externalities such as job creation and pollution into standard practices in order to provide a full picture of how they create a business. true value. “
By adopting new standards to measure their impact, companies can be incentivized to make more sustainable economic decisions, they added.
Recent research conducted by Harvard on 1,800 state-owned companies also showed that there was a significant relationship between negative environmental impact and declining market valuation.
This underlines the strong business case for greener business models, the consortium said.
DBS Group Managing Director Piyush Gupta said, âFinancial accounting is a useful way to measure performance. Unfortunately, its prism tends to be narrow and it misses several critical impacts of economic actors.
He added that as the world increasingly accepts the role of corporations in restoring multiple parties, not just shareholders, it becomes vital to create a better dashboard that takes into account the non-financial impact.
The report noted that organizations today deal with two separate and disconnected systems – one for financial performance and one for non-financial factors such as environmental and social performance.
“Failure to integrate the impact on people and the planet into decision-making and performance evaluation creates the real risk of undervaluing companies that take a multi-stakeholder perspective and doing good and over-valuing those that don’t, âhe said.
It offers a system that can measure the impact in quantitative units, while translating the impact into monetary value. Companies should also be responsible for the indirect impact along the value chain, such as a company investing in a coal-fired power plant.
Finally, this information must be combined so that it can have an impact on overall decision-making, according to the document.
UBS Group CEO Ralph Hamers added: âMeasuring previously unreported evidence will help the private sector address critical societal challenges such as climate change and inequality.
“The banking sector, with the ability to appropriately assess social and environmental risks, is well positioned to lead this transition.”