Copyright 2005 John Wiley & Sons, Ltd and ERP Environment

Sustainability Benchmarking
of European Banks and Financial
Service Organizations
Olaf Weber*
Swiss Federal Institute of Technology Zurich, Switzerland
ABSTRACT
A benchmark study of European banks and nancial service organizations is pre-
sented, inquiring into the extent to which they have integrated sustainability into their
policies, strategies, products, services and processes. Using a multi-level analysis
beginning with a screening of 127 organizations and nishing with in-depth interviews
of eight of them, approaches to integrating sustainability were analysed. Furthermore,
ve models for successful integration of sustainability into the banking business were
found: event related integration of sustainability, sustainability as a new banking strat-
egy, sustainability as a value driver, sustainability as a public mission and sustain-
ability as a requirement of clients. Copyright 2005 John Wiley & Sons, Ltd and ERP
Environment.
Received 18 December 2003, revised 14 July 2004, accepted 8 September 2004
Keywords: sustainability; banking; nance socially responsible investment; strategy
Introduction
S
INCE THE BOOK FINANCING CHANGE BY SCHMIDHEINY AND ZORRAQUIN PUBLISHED IN 1996,
sustainability seems to have been playing an important role for strategy development and opera-
tive business in the financial services sector (Jeucken, 2001). Thus, in 1992, UNEP introduced
the Statement by Banks on the Environment and Sustainable Development (UNEP, 1992).
In this statement, the signatories declare that they want to work cooperatively toward common envi-
ronmental goals. One important statement, among others, is that the signatories encourage the finan-
cial services sector to develop products and services that promote environmental protection.
Background
The financial sector began taking environmental risk into consideration by optimizing its internal envi-
ronmental performance (Weber, 2000). There were two main reasons for this. First, banks wanted to
* Correspondence to: Olaf Weber, Swiss Federal Institute of Technology Zurich, Natural and Social Science Interface, ETH Center HAD, CH-
8092 Zurich, Switzerland. E-mail: olaf.weber@env.ethz.ch
Corporate Social Responsibility and Environmental Management
Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/csr.077
74 O. Weber
decrease costs by reducing their use of energy, water and material (McCammon, 1995). Second, they
wanted to show their clients that it pays to be green. As a next step, environmental risk management
processes were introduced into credit management. There were some losses in the credit business
caused by environmental risks that justified environmental risk management measures in the credit
business (Scholz et al., 1995; Keidel, 1997; Coulson and Monks, 1999).
At the same time, banks regarded the increase in environmental attitudes in society as a business
opportunity. They subsequently created specialized credit products and mortgages as well as green or
socially responsible funds, which invest in environmentally friendly or sustainable firms (Jeucken, 2001;
Schaltegger and Figge, 2001).
However, it has become increasingly difficult to ascertain which kinds of measure or product labeled
green, socially responsible or sustainable have which kind of effect, both on banks and on sustain-
able development (Coulson and Monks, 1999; Knecht, 1997; Louche, 2001; Melnyk et al., 2003; Repetto
and Austin, 1999; Russo and Fouts, 1997; Stigson, 2001). Furthermore, it is hard to determine which
banks and financial institutions are the sustainability leaders in their sector.
Thus, with this benchmark study we wanted to answer the following questions.
Which European banks and financial service institutions have strategies, processes, services and prod-
ucts that foster sustainable development and what are the characteristics of these?
Why do banks and other financial institutions integrate such sustainable strategies, processes, ser-
vices and products into their business policies and their operational business (Springett, 2003)?
Method
To analyze the banks and financial service organizations, we conducted a sector specific benchmark
(Andersen and Pettersen, 1996; Mertins et al., 1995), rather than an overall benchmarking (Springett,
2003), because we wanted to analyze the best practice firms, services and products in the financial sector.
This sector is hardly comparable to other sectors. Thus an overall non-sector-specific benchmark would
not be the right method. Thus, the sample only consisted of banks and companies from the financial
sector.
The results of this kind of benchmark are rather qualitative than quantitative. A benchmark is a
method to identify leader organizations and leader products and not a method to find out what organi-
zations or products are representative for a special industry sector. However, to produce valid results we
mixed quantitative and qualitative methods in different levels of the benchmarking.
We present the multilevel design that we used in Figure 1.
We began with the 129 European signatories of the 2001 UNEP Statement by Banks on the Environ-
ment and Sustainable Development. They are listed in Table 1.
We then used a checklist to analyze the business reports of these organizations. This checklist con-
sisted of three sections: internal operations, investment business and credit business. It is based on the
GRI Framework (GRI, 2002) and on the criteria used in EPI Finance and SPI Finance (www.epifi-
nance.com, www.spifinance.com). Furthermore we based our indicators on the work of Callens and
Tyteca (1999), Fenchel (2003) and Schmid-Schnbein and Braunschweig (2000). For each business
field we used a four-point scale (from 1, existent, to 4, non-existent) (see Table 2). Every business field
had the same weight, stressing the sustainability of products and services and not the internal environ-
mental or social management. To avoid the evaluations being subjective, we had two experts evaluate
every business report. Afterwards, we compared their evaluations and created a consenting opinion. As
a result, we produced a first evaluation of the banks and financial organizations with respect to their
sustainability.
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Sustainability Benchmarking of European Banks and Financial Service Organizations 75
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Preselection: 171 UNEP signatories
Screening:
129 organizations
Benchmark:
22 organizations
Interviews:
8 banks
Preselection: 171 UNEP signatories
Screening:
129 organizations
Benchmark:
22 organizations
Interviews:
8 banks
Figure 1. Multilevel design
1. Banca Internacional DAndorra Banca Mora
2. Credit Andorra
3. Bank Austria
4. Bank fr Tirol und Vorarlberg Aktiengesellschaft
5. Bankhaus Carl Spngler & Co. Aktiengesellschaft
6. Creditanstalt-Bankverein
7. sterreichische Investitionskredit Aktiengesellschaft
8. sterreichische Kommunalkredit Aktiengesellschaft
9. Raiffeisen Zentralbank Austria AG
10. Balkanbank Ltd
11. Den Danske Bank, A/S
12. Unibank
13. Kansallis-Osake-Pankki
14. Banque Populaire du Haut-Rhin
15. Credit Local de France
16. Bankhaus Bauer AG
17. Bankhaus C.L. Seeliger
18. Bankhaus Max Flessa & Co.
19. Bankhaus Neelmeyer AG
20. Bankverein Werther AG
21. Bayerische Handelsbank AG
22. Bayerische Hypo-und Vereinsbank
23. Bayerische Landesbank Girozentrale
24. Benecial Bank AG
25. Bezirkssparkasse Heidelberg
26. BfG Bank AG
27. B. Metzler seel. Sohn & Co. KgaA
28. Commerzbank AG
29. Conrad Hinrich Donner Bank AG
30. DEG German Investment and Development Company
31. Degussa Bank GmbH
32. Delbrck & Co.
33. Deutsche Ausgleichsbank
34. Deutsche Bank AG
35. Deutsche Bank Saar
36. Deutsche Pfandbrief-und Hypothekenbank AG
37. Deutsche Postbank AG
38. DG Bank
39. Dresdner Bank AG
40. Eurohypo AG, Europische Hypothekenbank der
Deutschen Bank
41. Frstlich Castellsche Bank, Credit-Casse
42. Hamburgische Landesbank Girozentrale
43. Hesse Newman Co Bank (BNL Group)
44. HKB Hypotheken-und Kommunalkredit Bank
45. Investitionsbank des Landes Brandenburg
46. Kreditanstalt fr Wiederaufbau
47. Kreissparkasse Dsseldorf
48. Kreissparkasse Gppingen
49. Landesbank Baden-Wrttemberg
50. Landesbank Schleswig-Holstein Girozentrale
51. LBS Badische Landesbausparkasse
52. Merck Finck & Co.
53. M.M. Warburg & Co.
54. Quelle Bank AG
55. Sal. Oppenheim jr. & Cie
56. Schrder Mnchmeyer Hengst AG
57. Schwbische Bank AG
58. Service Bank GmbH & Co. KG
59. Sparkasse Leichlingen
60. Sparkasse Staufen
61. Stadtsparkasse Hannover
62. Stadtsparkasse Mnchen
63. Stadtsparkasse Wuppertal
64. UmweltBank AG
65. Vereins-und Westbank AG
66. Volksbank Siegen Netphen eG
67. Commercial Bank of Greece
Table 1. List of the 129 European organizations considered in the rst phase of benchmarking. The list was extracted from the
2001 UNEP Statement by Banks on the Environment and Sustainable Development
76 O. Weber
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
68. Budapest Bank RT.
69. National Savings and Commercial Bank Ltd., Hungary
70. Landsbanki Islands
71. Bank of Ireland Group
72. Banca Monte dei Paschi di Siena S.p.A
73. Istituto Nazionale di Credito Agrario S.p.A.
74. Credito Italiano
75. Algemene Spaarbank voor Nederland
76. FMO
77. Rabobank
78. Triodos Bank
79. Den norske Bank ASA
80. Bank Depozytowo-Kredytowy S.A.
81. Bank Gdanski S.A.
82. Bank Ochrony Srodowiska
83. Bank of Handlowy W. Warszawie S.A.
84. Bank Polska Kasa Opieki S.A.
85. Bank Przemystowo-Handlowy S.A.
86. Bank Rozwoju Eksportu S.A.
87. Bank Slakski S.A.
88. Bank Zachodni S.A.
89. National Fund for Environmental Protection and
Water Management, Poland
90. Polski Bank Inwestycyjny S.A.
91. Pomorski Bank Kredytowy S.A.
92. Powszechna Kasa Oszczednosci Bank Panstwowy
93. Powszechny Bank Gospodarczy S.A.
94. Powszechny Bank Kredytowy S.A.
95. Banco Bilbao Vizcaya (Portugal) S.A.
96. Banco Portuges do Atlantico S.A.
97. Romanian Commercial Bank SA
98. Econatsbank
99. Kreditna banka Maribor d.d.
100. Banca Catalana S.A.
101. Banco Bilbao Vizcaya S.A.
102. Banco del Comercio S.A.
103. Banesto, Banco Espagnol de Credito.
104. BBV Privanza Banco S.A.
105. Central Hispano.
106. Finanzia, Banca de Credito S.A.
107. Ekobanken Din Medlemsbank
108. JAK Jord, Arbete, Kapital
109. Skandinaviska Enskilda Banken
110. Svenska Handelsbanken
111. Swedbank AB
112. Bank Sarasin & Cie
113. Basellandschaftliche Kantonalbank
114. Credit Suisse Group
115. EPS Finance Ltd.
116. Luzerner Kantonalbank
117. Sustainable Asset Management
118. UBS AG
119. Zrcher Kantonalbank
120. Abbey National Plc.
121. Barclays Group Plc.
122. Cooperative Bank, Manchester
123. Friends Provident Life Ofce
124. HSBC Holdings Plc.
125. Lloyds TSB Bank
126. NatWest Group
127. Prudential Plc
128. Royal Bank of Scotland Plc.
129. Woolwich Plc.
Table 1. Continued
Internal operations Investment business Credit business
Sustainability program reporting Investment in sustainable Loans for sustainable companies and
Energy consumption projects projects, such as micro credits, social
Ratio renewable energy to total Amount of sustainability funds housing and eco-projects
energy consumption and the rejection of investments No credits for non-sustainable
Business related mobility in non-sustainable projects companies and projects
Paper consumption Shares or funds as negative Existence of a sustainability advisory board
Sustainability management criteria Control over the environmental impact of
Social criteria Existence of a sustainability the loans
Stakeholder communication advisory board Environmental rating or scoring of loans
Investment in sustainable Connection between credit pricing and
pioneer companies sustainability performance of the debtor
Loans for sustainable start-ups
Transparency of credit products and debtors
Table 2. Criteria of the sustainability checklist for the rst step of benchmarking
Sustainability Benchmarking of European Banks and Financial Service Organizations 77
As a next step, we considered organizations that had demonstrated outstanding sustainability in their
businesses. Additionally to an outstanding product or service the organization had to reach a 1 = exist-
ing rating on seven of the criteria in Table 2. These organizations were considered the European sus-
tainability leaders in the financial sector.
In order to find out why these organizations implemented the outstanding strategies, processes, ser-
vices or products in their business, we interviewed representatives of these organizations using a ques-
tionnaire containing a list of fixed questions but using the possibility of open answering.
As a methodological framework for the in-depth interviews, we used Jeuckens model of internal and
external bank stakeholders (2001) and the public entrepreneurship network model by Laws et al. (2001).
Both models make it possible to analyze the internal and external forces driving the integration of sus-
tainability in organizations.
Results
In the first step, we were able to identify 20 banks and financial institutions that integrate sustainabil-
ity into their business strategies and practices. We grouped these banks into alternative banks (AB, banks
that consider a positive influence on the environment, ethics or sustainability as one of their main busi-
ness goals); cooperative banks (CoB); banks under public law (PuB); asset management, investment
companies and private banks (AmPB); and universal banks (UB). In Table 3 we present the banks we
identified as sustainability leaders in the first step of the benchmark survey.
We analyzed the organizations presented in Table 3 in terms of their internal processes, credit prod-
ucts and asset management products. The ranking of this rating is presented in the columns rank inter-
nal sustainability, rank product sustainability and rank overall of Table 3.
In the following sections, we describe two kinds of result of this analysis:
in-depth-benchmarking of products and services
models of integrating sustainability into the banking business.
In-Depth Benchmarking of Products and Services
Internal Processes
AB1 and AB3 have clearly formulated and published business strategies for their environmental man-
agement. We rated these two banks as leaders because the environmental impact of AB1 and AB3 is less
than that of other banks and their social engagement is greater.
An employee of AB1 for example uses only one-third of the energy of an employee of UB1 (1977 kW
h/person versus 6600kWh/person). AB1 achieves this outstanding result by using energy efficient
systems (i.e. solar panels) and by implementing instruments indicating the energy use to the
employees.
Their social performance is characterized by gender equality in terms of salaries and their integration
of all employees into the decision process. To reach this goal, AB1 uses questionnaires, employee meet-
ings and its encouragement of employees bringing in their own ideas and initiatives. At AB3, the
employees share in the banks profit as well. Thus, in 2001, the bank reserved 10% of the recapitaliza-
tion for the employees.
AB1 and AB3 are active in reducing the impact of their employees commutes as well. AB3 covers the
cost of using public transportation for its employees and provides them with use of its solar station to
reload electric vehicles. AB1 counteracts the CO
2
emissions of its business travels by planting forests to
be CO
2
sinks.
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
78 O. Weber
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Group Indicator Number of Balance Description Rank internal Rank product Rank
employees sum in (country) sustainability sustainability overall
billion
euro
Alternative banks AB1 147 0.62 Financing 1 1 1
sustainable
projects and
ideas (NL, B, UK)
AB2 1.0 Founded by labour 18 2 3
movement to be
an ethical bank
(NL)
AB3 90 0.22 Financing 2 8 5
environmentally
friendly projects
and ideas (D)
Cooperative banks CoB1 4100 10.88 National (UK) 3 13 12
CoB2 49711 377 Transnational (NL) 6 4 4
Banks under PuB1 4071 53.07 Universal bank (CH) 5 3 2
public law
PuB2 1500 0.94 Financing 15 16 16
environmental
projects nationally
(PL)
PuB3 800 53.4 Promotion of 14 19 19
startups and
environmental
protection (D)
PuB4 291 1.73 Loans for foreign 17 19 20
investments (D)
Asset management AmPb1 0.18 Investment trust 19 12 13
and investment (CH)
companies,
private banks
AmPb2 710 3.56 Private bank (CH) 11 6 7
AmPb3 7 Asset management 19 15 17
department of a
universal bank (D)
AmPb4 90 60.73 Asset management 16 14 15
company (UK)
Universal banks UB1 80538 651 Transnational (CH) 9 7 8
UB2 71076 Transnational (CH) 10 10 11
UB3 65000 716 Transnational (D) 12 9 10
UB4 51456 483 Transnational (D) 8 5 6
UB5 98311 940 Transnational (D) 4 11 9
UB6 39044 459 Transnational (D) 13 18 18
UB7 16000 105 Transnational (S) 7 17 14
Table 3. The leaders in sustainability after the rst step of benchmarking and their ranking (names of the organizations are
encoded, but are known to the author), including their ranking in internal sustainability, product sustainability and overall (inter-
nal and product sustainability)
Sustainability Benchmarking of European Banks and Financial Service Organizations 79
The performance of CoB1, both socially and environmentally, is outstanding. The bank has made most
of its branch offices handicapped accessible. Whats more, it offers bank documents in large print or
Braille. Furthermore, it has implemented environmental and ethical standards for its suppliers and com-
municates with them in seminars and workshops.
CoB1 received awards for its sustainability report. The bank reports on its efforts and development,
both environmentally and socially. It sets measurable goals, the fulfillment of which can be tested
1the following year. An external auditor verifies these goals and measures to guarantee an independent
monitoring.
While most banks handle internal and product sustainability in different organizational units, CoB2
integrates both into one division. The specialists in this department not only develop new measures and
products, but implement them actively as well.
Credit Business
We compared 34 products in these business fields. We rated green credit funds and loans for envi-
ronmental and social investments as the best categories with respect to sustainability, because they go
beyond just reducing risks or increasing the benefit to the banks and have a positive impact on sus-
tainable development.
Again, the leaders in terms of sustainability are AB1 and AB3, because they only invest in businesses,
projects and sectors that are socially and environmentally harmless. The main debtors of these banks
are sustainable energy production companies, organic farms, food production and trade companies, and
environmental technology producers. They also finance institutions to foster SMEs, cultural and edu-
cational projects, environmentally friendly housing and projects in the healthcare and social sectors.
Both banks use negative criteria for all of their business with an independent advisory council con-
trolling them. They do not offer sustainable products as a special product, while at the same time invest-
ing in environmentally and socially harmful projects with their standard products, as do many universal
banks.
Both banks quantify and publish the environmental and social benefits of their business. AB3 quan-
tifies the reduction in CO
2
emission attributable to the renewable energy projects they finance.
Since implementing an ethical policy in 1992, CoB1 has excluded some sectors or projects on ethical
grounds. Nevertheless, CoB1 is not specialized as an environmental or social bank.
The following are CoB1s criteria for not financing projects:
disregard of human rights
production and trade of military goods
involvement of money laundering, drugs or other law violations
trade in developing countries, which involves irresponsible marketing practices
speculations
production and trade of tobacco, fossil fuels and persistent or environmentally harmful chemicals
non-sustainable use of natural resources
participation in animal experiments for cosmetics or household products
conventional farming
production and trade of furs.
How CoB1 developed its ethical policy is unique. It integrated its stakeholders into this process by
sending out questionnaires to the customers allowing them to advance their opinions about special sus-
tainability topics, such as genetic modification. CoB1 provides some explanation on this topic in advance
to support the clients participating. By this means customers can choose how this topic should be
handled within the ethical policy of the bank.
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
80 O. Weber
Most of the banks just integrate sustainability as a downside risk in their credit business. CoB2 tries
to positively reinforce sustainable behavior as well. During the credit management process it tries to
analyze whether a debtor had the potential to improve its environmental performance using energy effi-
cient measures or reducing environmentally harmful substances and products. This goes in line with
studies showing that the integration of sustainability aspects in credit management improves the overall
performance of the credit management process and thus reduces the credit risk for the lender (Fenchel,
2003; Michalik, 2001).
Green Credit Funds
In the Netherlands since 1992 there has been a law in which one does not have to pay capital income
tax for green credit funds if at least 70% of the money is invested in green projects (van Bellegem, 2001).
Thus, Dutch people can invest their money in green funds without losing income because of lower
output rates. These lower performance rates exist because these funds invest in projects that would not
be financed under normal circumstances because of lower financial returns.
The following is a list of the types of sector that compose the green funds:
natural environment, forestry, landscaping and organic farming
sustainable energy
housing (energy saving and environmentally friendly materials)
organic farming
soil decontamination
bicycle lines
other projects.
The funds invest in credits for projects that generate environmental or social benefits. Because of the
tax reduction, investors accept receiving a smaller return on their investments.
Green Loans with Interest Reduction
We were able to find interest-reduced loans at AB1, PuB1 and CoB1. AB1 offers these loans to
projects with social or environmental goals. PuB1 offers interest-reduced loans for houses and for SMEs
that outperform environmental standards. CoB1 gives them to companies from the environmental
sector.
While CoB1 offers interest reduction only to commercial debtors, PuB1 and AB1 offer interest reduc-
tions to private debtors as well. The latter are combined with special savings accounts with reduced rates
of interest, guaranteeing that this money will only be used for sustainable credits.
The difference between AB1 and the others is that AB1 combines environmental and social benefits
while PuB1 and CoB1 only offer credits for environmentally friendly projects.
Environmentally Friendly Mortgages
There are two environmentally friendly mortgage products that we identified as leaders in sustainabil-
ity. These are AB3s environmental construction loans and AB1s green mortgages.
AB3 connects the environmental performance of a house with its interest rate. The more points on a
checklist a borrower achieves, the less interest he or she has to pay.
In order to reduce global warming and air pollution emissions CoB1 donates money to climate pro-
tection projects and offers advice about the energy efficiency of the houses of its clients.
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Sustainability Benchmarking of European Banks and Financial Service Organizations 81
Environmental Loans of Public Banks
The leader of public banks giving environmental loans is PuB2, especially because this bank publishes
information on the environmental benefits of its loans annually. The bank publishes in a report for its
stakeholders figures for regional dust, SO
2
and NO
x
reductions, the volume of sewage treated by the
sewage plants it finances, the capacity of the waste sites it finances and the physical length of the sewers
it finances.
Micro Credit Funds
There are two banks, AB1 and AB2, that offer micro credit funds. Both are based on special savings
accounts providing the capital for the micro credits. Furthermore, customers can donate a part of the
interest they earn with these savings accounts to development projects. In the case of the AB1 fund, an
NGO development organization takes 90% of the failure risk for the given credits.
Asset Management
We evaluated 48 products from 17 organizations.
We analyzed 24 equity funds from 13 organizations, which invest based on ethical, environmental or
sustainability criteria. We identified a green mutual fund by PuB1 and a venture capital fund by AB1 as
the leaders. These funds evaluate environmental and social criteria in an outstanding way.
Most of these funds exclude enterprises in the field of pesticides, tobacco, gambling, weapons, mili-
tary equipment and drugs of all kind. One fund additionally excludes sectors in the airlines, automotive
and aircraft industries, as well as in fields that produce or trade non-renewable energy sources.
The AB1 fund uses a more positively driven approach. The fund invests in sectors that are defined as
sustainable. These include telecommunications, education, healthcare, environmental technology and
consultancy, sustainable financial service providers and sustainable mobility, such as mass transport or
bicycles, as well as the production and trade of organically farmed products and renewable energy.
We regard two mixed funds as the leaders in their group: the AmPb2 fund and AB1 fund. 20% of
AmPb2s portfolio is pioneer companies, and it uses detailed criteria to valuate the sustainability of gov-
ernmental bonds.
The AB1 fund invests in renewable energy, sustainable mobility, tourism, banking, health, education
and the telecommunications industry. In addition, the fund prefers government bonds from countries
handling environmental and societal problems in a progressive way. They do not invest in countries
accepting or fostering corruption, dictatorship, violation of human rights or discrimination against
minorities.
Industry specific funds and funds investing in renewable energies: AmPb2, Ub1 and AmPb1 each operate
an investment company investing in sustainable companies. They invest in SMEs producing wind or
solar energy, building components such as fuel cells or offering services in the field of renewable energy.
They all invest in sector leaders and in green venture capital (Randjelovic et al., 2003).
Models of Integrating Sustainability into the Banking Business
As a result of the first steps of the benchmark and in-depth interviews with representatives of banks and
financial institutions, we were able to extract five models for integrating sustainability into the business
strategies of banks and financial institutions. These models describe the motives of the organizations
to integrate sustainability into their business strategies. The models also show that financial motives are
not the only reason to integrate sustainability into business (Edwards et al., 2002; Springett, 2003).
We extracted five models:
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
82 O. Weber
event related integration of sustainability
sustainability as a new banking strategy
sustainability as a value driver
sustainability as a public mission
sustainability as a requirement of clients.
In the following sections, we describe the models in detail.
Event Related Integration of Sustainability
In the 1980s in a midsize city the biggest accident in the countrys chemical industry history occurred.
A mixture of water and chemicals flowed into one of Europes biggest rivers.
At this time, the representatives of a well known private bank met. They were very concerned about
this accident and its consequences on the environment. Furthermore, in this situation some clients had
been asking the bank if they had a kind of environmental asset product. Thus, the representatives of the
bank discussed whether there was an opportunity for a bank to do something for the environment that
could prevent such accidents in the future.
They started to create an environmental techniques fund. For several reasons this product was not
very successful. Despite this failure, the bank continued to develop new products pointing in the same
direction.
As a next step, in 1994 they created a mutual fund containing the most eco-efficient companies. In
contrast to the first trial, this product was very successful economically. Subsequently, the bank contin-
ued to create similar products based on in-depth analysis of the environmental and social performance
of the companies the funds invested in. The mutual funds were so sound environmentally and socially
that the bank built up a positive reputation among many people interested in this topic.
The original reason to offer these mutual funds was the personal concern of the leaders (see Figure
2), who were not greatly interested in environmental concerns before the accident. They also did not
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Personal concerns
about an event
society
clients
investors
suppliers
NGOs
competitors
Public
administration
or regulations
Business
leaders
Bank /
Financial service
organization
Other financial
institutions
Figure 2. Event related integration of sustainability
Sustainability Benchmarking of European Banks and Financial Service Organizations 83
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
know initially how to create an environmentally friendly financial product. This personal motivation,
however, got the project running and guaranteed support from the banks leaders.
Such events negative or positive can kickoff the integration of sustainability into business poli-
cies and strategies. Examples of such events include the introduction of an environmental tax or a con-
ference on sustainability. One important condition, however, is that the leaders of a bank foster the
integration of sustainability. This can overcome the lack of competence concerning sustainability often
found in banks.
In this case, one other condition of success was the good financial performance of the eco-funds,
which made them competitive with other non-environmental financial products.
Sustainability as a New Banking Strategy
In the 1980s a group of banking specialists with an anthroposophical background and the willingness
to handle money in an environmentally and socially responsible way founded AB1 (see Figure 3). The
bank tries to use a new principle in banking to lead all of its business. It is based on handling money
in a more environmentally and socially responsible way, unlike most other banks in the world.
Thus, AB1 is a good example of how sustainability can be integrated into the banking business and
how this can influence the whole financial sector.
Sustainability as a Value Driver
Already in the early 1990s, banks managing environmental risks in credit management found that envi-
ronment and sustainability are not only business risks, but can be business opportunities as well and
thus have a positive influence on the shareholder value as well (Schaltegger and Figge, 2000; Fenchel,
2003). Thus, they started to create sustainable products in the fields of asset or credit management (see
Figure 4).
However, the products and services associated with sustainability generally are not the core of the
business and do not play a big role in a bank monetarily, although they are well received by the public
Personal concerns
about an event
society
clients
investors
suppliers
NGOs
competitors
Other financial
institutions
Public
administration
or regulations
Business
leaders
Bank /
Financial service
organization
t
l
Figure 3. Sustainability as a new banking strategy
84 O. Weber
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Personal concerns
about an event
society
clients
investors
suppliers
NGOs
competitors
Public
administration
or regulations
Business
leaders
Bank /
Financial service
organization
Other financial
institutions
Figure 4. Sustainability as a value driver
and could help to create a better image for these banks. Furthermore, the general business strategy of
the transnational banks in our sample is not influenced very much by the concept of sustainability.
Sustainability as a Public Mission
Some banks have bodies that are publicly responsible. These banks officially perform their business on
behalf of a public body, such as a state or a local authority. Sometimes, however, these authorities have
a mission of sustainability. Then, the banks generally integrate this mission into their own mission (see
Figure 5). For example, PuB1s mission includes contributing to the states sustainable development.
Thus, public opinion influenced the strategy of the bank via the state administration. In the case of PuB1,
the bank put the sustainability mission into practice and created sustainable products and services; it
invested in environmental funds, loans and mortgages and engaged in public projects geared towards
the states sustainable development.
Sustainability as a Requirement of Clients
CoB1 carried out a survey in the 1980s in which they asked their clients about the image of the bank.
It was surprising to the representatives of the bank that their clients perceived the bank as socially
responsible. Thus, the bank started to use this image to create a socially responsible business to differ-
entiate itself from its competitors (see Figure 6). This led to the development of an ethical policy for the
bank in 1992, which not only includes environmental aspects, but also social aspects, and thus can be
called sustainable (Sharma and Ruud, 2003). Moreover, the bank regularly adapts the criteria of this
policy to its clients needs.
Although it is hard to prove that this ethical brand is contributing to the profit of the bank, CoB1
reports it contributes to between 15 and 18% of the profit. Furthermore, in the last eight years, CoB1 has
performed better than average for banks in the same country, and at the same time the bank creates
products that have a positive impact on sustainability.
Sustainability Benchmarking of European Banks and Financial Service Organizations 85
Copyright 2005 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 12, 7387 (2005)
Personal concerns
about an event
society
clients
investors
suppliers
NGOs
competitors
Other financial
institutions
Public
administration
or regulations
Business
leaders
Bank /
Financial service
organization
l
Figure 5. Sustainability as a public mission
Personal concerns
about an event
society
clients
investors
suppliers
NGOs
competitors
Other financial
institutions
Public
administration
or regulations
Business
leaders
Bank /
Financial service
organization
l
Figure 6. Sustainability as a requirement of clients
Conclusions and Implications
In this paper, we have described the results of a multi-level benchmark study of the integration of sus-
tainability into the business strategy, services and products of European banks and financial institutions.
We were able to determine the products and organizations that are leaders in terms of sustainability
and we have described five models of integrating sustainability into business strategy.
86 O. Weber
Nearly every bank in our list performs very well in some of their business fields. Only the so-called
alternative banks, however, integrate sustainability into their general business strategy. Thus, all of their
products are consistent with the concept of sustainability, unlike many of the other banks, which use
the concept as a value driver for certain products, which they offer in addition to conventional products.
Our examples show that alternative banks can also be financially successful and have growth rates
similar to, or even better than, those of their conventional competitors.
Our survey demonstrated that the social aspects of sustainability (Sharma and Ruud, 2003) find their
way into the banking business as in the example of CoB1. It must be said, however, that products and
services in this field are mainly in their infancy.
In addition to the analyses, which provide financial motivation to integrate sustainability into busi-
ness (Cortazar et al., 1998; Klassen and McLaughlin, 1996; Russo and Fouts, 1997), we have shown that
motives such as personal concern, philosophical backgrounds such as anthroposophy, or missions of
public bank owners can lead to sustainability being successfully integrated into the banking business
(Springett, 2003).
These strategies lead to new sustainable products, such as venture capital funds (Randjelovic et al.,
2003), micro credit funds or green mortgages, all of which are needed to foster sustainable
development.
Further analyses will be necessary to measure the impact of integrating sustainability into the busi-
ness strategies of the financial sector; these strategies reach beyond pure financial success measurement
and integrate the impact on sustainable development as well (Edwards et al., 2002). Initial approaches
that can fulfill this necessity already exist. One example of such an approach is the sustainability bal-
anced scorecard (Figge et al., 2002).
Acknowledgement
The research was sponsored by the Wissenschaftsfrderung der Deutschen Sparkassenorganisation, Bonn, Germany, No.
3801/101.
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Biography
Olaf Weber can be contacted at the Swiss Federal Institute of Technology Zurich, Natural and Social
Science Interface, ETH Center HAD, CH-8092 Zurich, Switzerland.
Tel.: ++4116326444.
Fax: ++4116321029.
E-mail address: olaf.weber@env.ethz.ch