Public Comment Version of FSSS 151007 - UNEP FI · 2007. 10. 16. · 3 Aligning the FSSS and the G3 Guidelines: One of the key tasks for the Working Group has been to organize the

Invitation for Comment

Revised version of the

GRI Financial Services Sector Supplement

Invitation to Comment

This document is an invitation and request to all interested parties to provide

their feedback on the output of the working. All comments received will be

reviewed by the working group in their final meeting in early 2008. In providing

your feedback, you are requested to use the attached form since this will

facilitate the comparison and consolidation of responses. For all of the issues,

the key questions are:

1) Is this issue sufficiently important and finance sector specific that it should be

included as a new indicator in the Supplement?

2) Will this indicator allow you to monitor and analyze good and bad

performance?

3) If the indicator is not useful, what would you suggest as an alternative?

How to respond to this document:

Please send your response using the attached response form by January 10,

2008 to both:

Sean Gilbert, GRI ([email protected]) and Regina Kessler, UNEP FI

([email protected]).

Background

In 2003, the GRI and UNEP FI co-convened a global, multi-stakeholder process

involving key international financial sector and stakeholder leaders to create Pilot

Version 1.0 of the GRI Financial Services Sector Supplement (Environmental

Performance). The environmental performance supplement was completed in the fourth

quarter of 2004, and released in March 2005. It complements the existing Pilot Version

1.0 of the GRI Financial Services Supplement (Social Performance) which was

released already in November 2002. Both supplements are available for download at:

http://www.globalreporting.org/ReportingFramework/G3Online/SectorSupplements

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Pilot process

Since 2006, the GRI and UNEP FI have jointly convened a piloting process to review

the experience of report preparers and report users in applying the GRI Financial

Services Supplements (environmental and social). Both supplements have been

available and in use as pilot versions, and the piloting process constitutes a formal

review of experience that will result in:

1) amended indicators; 2) technical protocols for each of the indicators; 3) alignment of the social and environmental indicators with the G3 Guidelines;

and 4) combining the environmental and social indicators into a single set.

The Working Group has spent several months evaluating the current supplement and

also invited public feedback in May-June 2007 on gaps in the social indicators. The

group has revised the indicators of the Financial Services Sector Supplement as can be

seen on the subsequent pages and is now releasing these for a 90-day public comment

period. The Working Group will review all comments received to create a final set of

indicators and protocols for submission to the GRI Technical Advisory Committee

(TAC). Once reviewed by the TAC, the draft final version will be sent to the GRI Board

of Directors for their review.

The revised GRI Financial Services Sector Supplement (FSSS)

The intent of the FSSS is to ensure that the GRI Framework covers the material

sustainability issues for the financial services industry in a manner that is appropriate

and meaningful to the sector. Therefore, it has focused on developing two things:

1. Commentaries on existing GRI indicators – These commentaries are intended

to help explain how to apply certain indicators in the context of the financial

services industry.

2. New disclosures and indicators – These were created to cover material issues

for the sector that were not already addressed within the GRI Guidelines.

This document has been organized in the following manner:

1) Table that summarizes the full contents of the revised FSSS

2) Full listing of the indicators with their supporting technical protocols. These are

organized by category:

a. Product and service impacts category

b. Performance indicators and technical protocols for existing G3

categories

c. Commentaries to existing GRI indicators

3) Table summarizing changes to the previous pilot versions

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Aligning the FSSS and the G3 Guidelines:

One of the key tasks for the Working Group has been to organize the content of the

Sector Supplement to fit within the G3 Guidelines. This has been done in the following

ways:

Placing Supplement Indicators in Relation to the G3 Indicators

The G3 Guidelines are organized around 6 main sustainability topics (indicator

categories). These are Economics, Environment, Labour Practices and Decent Work,

Human Rights, Society and Product Responsibility. A number of the indicators

developed by the working group could be understood to fit within these categories.

However, the group also developed a new set of indicators which it proposes to

organize under a new category called “Product and Service Impacts” to reflect all the

indicators relating the sustainability performance of financial products and services.

This category will follow the same structure as the other G3 categories and will include

a “Disclosure on Management Approach” (DMA) followed by the performance

indicators.

Differentiating between the DMA and Performance Indicators

The G3 Guidelines differentiate between standard disclosures and performance

indicators. Each indicator category has a Disclosure on Management Approach (DMA)

section and a performance indicator section. The DMA invites the reporter to provide a

brief overview of the organization’s management approach to the Aspects defined

under each Indicator Category in order to set the context for performance information.

Commentaries

The supplement also includes commentaries on how financial services institutions

should interpret performance indicators within the G3 that are relevant for the financial

sector, but require further specification. A commentary then provides additional

information on how the indicator or DMA should be responded to by a financial services

institution.

1) Summary Table of the contents of the revised FSSS Sector-Specific Disclosures of Management Approach for Products and Services D1 Description of policies with specific environmental and social components applied to business lines

D2 Description of procedures for assessing and screening environmental and social risks in business lines for each

policy

D3 Description of processes for monitoring clients’ implementation of and compliance with environmental and social

requirements included in agreements or transactions

D4 Description of process(es) for improving staff competency to address environmental and social risks and

opportunities

D5 Description of interactions with clients and other stakeholders regarding environmental and social risks and

opportunities

Performance Indicators

Category Aspect Indicator Audit Coverage and frequency of audits to assess implementation of environmental

and social policies and risk assessment procedures

Percentage and number of companies held in the institution’s portfolio with

which the reporting organisation has interacted on environmental or social

issues

Percentage of assets subject to positive and negative environmental or social

screening

Product and

Service Impacts

Active

Ownership

Voting polic(ies) applied to environmental or social issues for shares over

which the reporting organisation holds the right to vote shares or advise on

voting

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Monetary value of products and services designed to deliver a specific social

benefit for each business line broken down by purpose

Total monetary value of specific environmental products and services broken

down by business lines

Product Portfolio

Percentage of the portfolio for business lines by specific region, size (e.g.

micro/SME/large) and by sector

Society

(Community)

Access to financial services in low-populated or economically disadvantaged

areas by type of access

Society Initiatives to improve access for people with disabilities and impairments

Responsibility regarding the design and sale of financial product and services Product

responsibility

Initiatives to enhance financial literacy by beneficiary type

Commentaries on Existing G3 Indicators

Commentary Placement Community Investment Economics DMA

Community Investment EC1

Human rights HR2

Violence against employees Labor DMA

Total material use EN1

Total waste by type and destination EN22

Indirect GHG emissions EN16

The GRI Financial Services Sector Supplement

- Draft version proposed for public comment –

Full Text of the New Disclosures, Indicators, and Commentaries (including associated

protocols)

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Product and Service Impacts Category - Disclosure on Management Approach

Provide a concise disclosure on the Management Approach items with

reference to the Product and Service Aspects listed below.

• Audits

• Active Ownership

• Product Portfolio

Goals and Performance

Organization–wide goals regarding performance relevant to Aspects, including

plans to improve implementation of policies/procedures identified in D1 and D2

and any relevant audit results.

Use organization-specific indicators (as needed) in addition to the GRI

Performance Indicators to demonstrate the results of performance against

goals.

Policy (D1)

Brief, organization-wide policy (or policies) that defines the organization’s

overall commitment related to Product and Service Impact Aspects, or state

where this can be found in the public domain (e.g., web link).

Organizational responsibility

The most senior position with operational responsibility for Product and Service

Impact Aspects or explain how operational responsibility is divided at the senior

level for these Aspects. This differs from Disclosure 4.1 in the G3 Guidelines,

which focuses on structures at the governance level.

Training and awareness (D4)

Procedures related to training and raising awareness in relation to Product and

Service Impact Aspects.

Monitoring and Follow-Up (D3)

Procedures related to monitoring and corrective and preventive actions. List of

certifications or other approaches to auditing/verifying the reporting

organization’s performance.

Additional Contextual Information

Additional relevant information required to understand organizational

performance, such as:

• Key successes and shortcomings;

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• Major organizational risks and opportunities;

• Major changes in the reporting period to systems or structures to improve

performance; and

• Key strategies and procedures for implementing policies or achieving

goals.

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D1: Description of policies with specific environmental and social components applied to business lines

1. Relevance

This indicator is intended to provide an overview of the reporting organisation’s

intention to consider environmental and social criteria across design and delivery of

core products and services (e.g. project finance, loans, mortgages, mutual funds, etc.).

The quality of the environmental and social policy and its implementation can influence

the risk exposure of the institution and the environmental impacts resulting from the

projects or activities enabled by its products and services.

2. Compilation

2.1 Identify the environmental and social policies that are currently applied across

business lines. This may include both global policies as well as policies applied

only in specific markets/regions/subsidiaries. Policies may be designed specifically

for one issue (i.e. “stand-alone”) or may be specific environmental and social

commitments within policies that are designed to apply to sectors or general

financing. For example, a sector policy on the chemicals industry could include

specific requirements on environmental performance or risk management.

Policies could pertain to issues such as:

- climate change

- human rights

- resettlement of communities (project finance)

- forestry

2.2 Identify the scope of the policies, which business lines they apply to, and how they

are considered in decision-making processes about existing or future

products/services.

2.3 Identify the objectives, targets and timetables pertaining to the implementation of

each policy.

2.4 Identify whether the policies have been formally adopted by the organisation, at

what level (e.g. board level, executive level etc.), whether they are regularly

reviewed and how they are disseminated including whether or not they are made

publicly available.

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2.5 If the reporting organisation does not have formal environmental and social policies

applying to the activities of its business lines, the reporting organisation should

identify any unwritten environmental objectives or goals currently used to guide

decision-making and should determine what mechanisms are in place to ensure

the outcomes are achieved.

2.6 Report the following:

• Scope of policies (e.g., implementing department for the policy, content,

business lines covered, geographical areas, etc.);

• Identify the department that will ensure the implementation of the policy;

• How policies influence decision-making about existing or future

products/services and in engagement with stakeholders;

• Location of publicly available policies;

• Where no policies are in place, describe what measures are adopted to set

and implement environmental and social objectives and how these deliver

the desired environmental and social outcomes.

3. Definitions

Business lines

Business lines are defined as:

• Retail banking;

• Commercial and corporate banking;

• Asset management; and

• Insurance.

4. Documentation

Documents held by investment or product managers that guide decisions on

environmental and social issues, objectives or goals in product or service transactions.

These are likely to be held by the business lines themselves. In some cases, these

objectives or goals may not be written in formal policies in which case the reporting

organisation may describe unwritten practices or provide details as to why a policy is

not needed and what alternative approaches are used to provide guidance on

environmental and social objectives or goals applied across business lines.

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D2: Description of procedures for assessing and screening environmental and social risks in business lines for each policy

1. Relevance

The indicator explains the process(es) and procedures that the reporting organisation

uses to assess the environmental and social impacts of its products and services and

how this affects transaction decisions. The indicator will provide insight on capacity of

the reporting organisation to manage environmental and social risks and minimize the

likelihood of negative environmental and social impacts across its business lines.

2. Compilation

2.1 Identify existing procedures used in different business lines for assessing and

screening environmental and social risks. The procedures typically cover how the

risks are identified and assessed and what actions are then taken in response to

the assessment. Identify how the procedures were developed, particularly the role

of stakeholder engagement.

2.2 Identify the objectives of the risk assessment and screening procedures, and the

frequency of such assessments.

2.3 Identify the procedures applied, if a significant risk is identified (e.g. initiating

environmental impact assessments, human rights impact assessment, due

diligence activities, commissioning reports and/or surveys).

2.4 Identify how the outcomes of such procedures influence transaction decisions.

2.5 Identify who holds responsibility for environmental and social risk assessment

procedures, their level in the organisation and how the implementation of the

procedures is monitored.

2.6 Identify the threshold at which these procedures are applied.

2.7 Identify the frequency of review of the threshold level and any variations in

threshold levels applied to different markets/countries or different

products/services.


• The process and procedures used including their objectives;

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• Who holds responsibility for the procedures;

• Stage at which policies are applied in the design and delivery of products

and services;

• How outcomes influence transaction decisions (e.g., decision to decline or

approve transaction, addition of preferential conditions, adding performance

standards to the transaction, establishing monitor requirements, etc.);

• The thresholds applied to determine whether environmental and social risk

assessment is needed, including any variations by geography or across

different products/services.

3. Definition

Environmental and social risk

The probability and significance of an adverse environmental and social impact arising

from the activities of either the financial institutions or its clients, investee companies, or

transactions and consequently having some financial or non-financial impact on the

company or its clients.

Thresholds

The values or trigger points at which an environmental and social assessment

procedure is applied as part of the decision-making process on a transaction.

Thresholds can be based on:

• Transaction size;

• Transaction type;

• Temporal commitment (e.g. term of investment);

• Type of client/investee/business (e.g. SMEs, industry sector, personal loans,

contaminated land insurance, loans to holding companies, governmental bodies);

• Geographic region of business transaction;

• Scale of potential environmental or social impacts.

4. Documentation

Documents that guide staff on how to assess the environmental and social impacts of

its products and services and describe how outcomes of this assessment may affect

transaction decisions. These are likely to be held by the business lines themselves. In

some cases, these guidelines may not be written in formal policies in which case the

reporting organisation may describe unwritten practices or provide details as to why a

policy is not needed and what alternative approaches are used to provide guidance on

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the environmental and social impacts of its products and services applied across

business lines.

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D3: Description of processes for monitoring clients’ implementation of and compliance with environmental and social requirements included in agreements or transactions

1. Relevance

The indicator explains how the reporting organisation ensures that its policies and

procedures are being followed and risks and impacts are minimized. This relates to

environmental requirements included in contracts/formal agreements.

2. Compilation

2.1 The indicator applies to commercial and corporate banking, and insurance only.

This does not apply to retail banking.

2.2 Identify the environmental and social risk assessment processes for different

business lines. In some cases these processes may not be explicit within the

reporting organisation. Where this is the case, reporting organisations should

identify what practices are currently followed.

2.3 Identify the method(s) (e.g. site visits) by which the reporting organization monitors

or assesses clients’ fulfilment of agreed environmental and social objectives (e.g.

those in loan covenants).

2.4 Identify what form this monitoring or assessing takes (e.g. compliance monitoring,

assessing changes to environmental/social significance or environmental/social

aspects).

2.5 Identify how non-compliance with agreements is determined and what actions are

taken in response to incidents of non-compliance including how deadlines are set

for compliance to be achieved.

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• The method(s) used for tracking clients’ fulfilment of agreed environmental

and social improvement objectives;

• The form of this monitoring;

• How non-compliance with agreements is addressed and what action is being

taken following any breach of covenants.

Please note: Reporting organisations are only being asked to report on process in this

indicator. They are not being asked to provide quantitative data (e.g. numbers of non-

compliance events).

3. Definitions

None

4. Documentation

Documents that ensure that the reporting organization’s policies and procedures are

being followed and risks and impacts are minimized. These are likely to be held by the

credit, risk and/or audit groups. In some cases, these assessment parameters may not

be written in formal policies in which case the reporting organisation may describe

unwritten practices or provide details as to why assurance is not needed and what

alternative approaches are used to ensure that the reporting organization’s policies and

procedures are being followed and risks and impacts are minimized.

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D4: Description of process(es) for improving staff competency to address environmental and social risks and opportunities

1. Relevance

The indicator enables assessment of the degree to which the reporting organisation

has ensured the necessary competencies are in place to effectively address the

environmental and social risks and opportunities associated with its products and

services. This is relevant for understanding how the organization is positioned to

implement the policies identified in D1 and manage the risks and opportunities

identified in D2.

2. Compilation

2.1 Identify how the reporting organisation determines which staff require specific

competencies to address both direct and indirect environmental and social risks

and opportunities.

2.2 Identify how the competencies of staff are assessed and training needs identified,

includes methods such as staff appraisals, line manager recommendations, the

use of questionnaires, or the use of tests.

2.3 Identify the activities the reporting organisation uses to improve the competency of

staff (e.g. training, mentoring).

2.4 Identify the recipients of these activities, the focus of the activities and whether the

activities undertaken (e.g. training, mentoring etc.) are part of core training,

additional or stand-alone/one-off.

2.5 Identify how the reporting organisation monitors the quality and effectiveness of

these activities including their impact on staff competencies.


• The process(es) the reporting organisation uses to ensure staff managing

environmental and social risks and opportunities have the necessary

competencies;

• How these competencies are improved over time;

• Number of staff that received training, the focus of the training and total

hours of training provided

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3. Definitions

4. Documentation

Documents that ensure the necessary competencies are in place to effectively address

the environmental and social risks and opportunities associated with the reporting

organization’s products and services. These are likely to be held by the training, credit,

compliance and/or audit groups.

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D5: Description of interactions with clients and other stakeholders regarding environmental and social risks and opportunities

1. Relevance

The indicator describes actions taken by the reporting organization to influence the

behaviour of clients and other stakeholders. The quality and approach to interactions

can serve as a proxy for the organization’s capacity for identifying potential risks and

effecting improvements as well as its ability to maintain effective stakeholder relations.

The indirect impacts associated with the actions of clients and other stakeholders may

be more significant than the direct impacts of a financial institution, and interactions are

therefore one of the key opportunities for managing impacts. It is also an essential

element of plans for implementing policies and procedures for environmental and social

risk assessment.

2. Compilation

2.1 This indicator is intended to reflect an overview of interactions as a whole rather

than a detailed catalogue of individual interactions. More detailed engagement

reports should be referenced where available.

2.2 Identify which clients/other stakeholders are engaged with on environmental and

social issues, and who engages on behalf of the reporting organization (the

individual(s) or organization that undertakes the interaction on behalf of the

financial institution).

2.3 Identify how these groups have been prioritised for interaction. In retail,

commercial and corporate banking the focus of interaction is likely to be with

clients receiving credit. On the other hand, asset management will likely focus on

investee companies and insurance on business partners.

2.4 Identify the aim(s) of the interaction or engagement. Among others, interactions

may be aimed at examining clients’ approaches to management of environmental

risks.


• Summary of interactions undertaken in the reporting period including the

individuals/departments/organizations undertaking interactions;

• The goals of the interactions;

• Approaches adopted to prioritise topics and targets for interactions;

• Methods employed (e.g., face-to-face meetings, questionnaires);

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• The timing or schedule of interactions;

• The outcome of interactions against the identified goals;

• The process for monitoring and following up the outcome of interactions.

3. Definitions

Clients and other stakeholders

For the purposes of this indicator, clients and other stakeholders refers to all actors

within the investment chain (e.g. research organisations) but does not include the

whole supply chain (e.g. of standard products). This term also includes both partners

who deliver products and services, and users of the end products and services. It

therefore includes:

• Clients (individuals or business);

• Companies that the reporting organization has invested in;

• Business partners;

• Recipients of capital or finance;

• Recipients of insurance;

• Parties involved in the provision of insurance services (e.g. third party

organisations selling insurance on behalf of an insurer);

• NGOs;

• Trade Unions;

• Communities.

Interactions

Refer to the communications and other activities between the reporting organisation

and its clients, investee companies, and/or business partners to raise awareness

and/or improve their environmental and social performance that are not governed by an

existing set of contractual obligations. Approaches used for these interactions often

vary by business line.

The term “interaction” is used more frequently within retail banking, and the term

“engagement” is that more often used in asset management. For this indicator

“interaction” is also taken to mean “engagement”.

Please note: Interactions relating to agreed environmental and social obligations

should be reported under indicator F4. Proxy voting and related activities are covered

under indicator F10/F11.

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4. Documentation

Documents owned by the CSR /Corporate Governance, risk management or investor

Relations Department:

• Monitoring, evaluation and ranking procedures related to environmental and social

issues

• List of the objectives and targets of the clients/other stakeholders

• Results of surveys concerning environmental and social performance of

clients/other stakeholders

• Minutes of focus-groups meetings on environmental and social issues

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Performance Indicators

Category: Product and Service impact Aspect: Audit

Indicator #1: Coverage and frequency of audits to assess implementation of environmental and social policies and risk assessment procedures

1. Relevance

The information from this indicator helps provide assurance as to the degree to which

the organization is monitoring its implementation of the environmental and social

policies and procedures identified in D1 and D2. In particular, it provides insight into the

degree to which these are monitored across the range of the organization’s business

lines and areas of operations. Given the limitations in measuring implementation of

processes in quantitative form, the auditing approach and its results becomes an

important proxy for assessing the depth of the implementation of policies and

procedures.

2. Compilation

2.1 Identify audit programmes currently undertaken for the products and services of the

organization’s business lines. This includes specific environmental and social

audits and integrated audits which cover other processes in addition to

environmental and social policies, procedures and systems.

2.2 Identify the purpose and coverage of the identified audit programme in terms of

business lines. Within each business line, identify whether there are audits that

have any specific exclusions or limitations with regard to:

- Products and services

- Geographic regions/operations

2.3 Identify whether the audit(s) was carried out using internal/external auditor(s) and

which if any, standards were utilised during the audit.

2.4 Report the following for each business line:

• Whether the organization has implemented auditing systems for its

environmental and social risk assessment policies

• Any exclusions or limitations to the audit coverage of regions or products

and services;

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• Whether the audit(s) was carried out using internal/external auditor(s);

• The names of any standards utilised for the audit;

• General results.

3. Definitions

Audit

An audit is a systematic, documented, periodic and objective process used to verify

compliance, measure performance or ensure continuous improvement against external

standards/legal requirements, internal policies and procedures or good industry

practice.

Refer to the type of audit undertaken (e.g. specialised audits for policies only,

environmental/social management system audits, compliance audits or routine

business audits etc.)

4. Documentation

Documents that describe the degree to which the organization is monitoring its

implementation of the environmental and social policies and procedures identified in D1

and D2. These are likely to be held by credit, compliance, risk and/or audit groups. In

some cases, formal assessment parameters may not be in place in which case the


formal process is not needed and what alternative approaches are used to ensure the

implementation of the environmental and social policies and procedures identified in D1

and D2.

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Category: Product and Service Impact Aspect: Active Ownership Indicator #2: Percentage and number of companies held in the institution’s portfolio with which the reporting organisation has interacted on environmental or social issues

1. Relevance

The indicator illustrates the scale of engagement on environmental or social issues

within the reporting organisation. The indicator illustrates the extent to which

environmental or social management across an institution’s portfolio is regarded as a

priority and allows for year-on-year comparison. This activity is becoming more

prevalent amongst institutions as environmental or social issues in the reporting

organisation’s portfolio present a growing risk.

2. Compilation

2.1 Primarily for asset management and insurance.

2.2 Identify those departments across the reporting organisation that engage on

environmental or social issues across the institution’s portfolio.

2.3 Identify the total number of companies across the institution’s portfolio.

2.4 Quantify this engagement activity in terms of absolute numbers of companies

engaged and the percentage of companies against the total number of companies

in the portfolio. This should count company-specific interactions and should not

count activities targeted at groups of companies (e.g., events, seminars, press

releases, etc.).

2.5 Report separately the percentage and number of companies held in the

institution’s portfolio with which the reporting organisation has engaged on

environmental or social issues.

The reporting organisation should also report the total number of companies

in the portfolio, if this is unclear for the reader or difficult to calculate from

the presented information.

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3. Definitions

Engagement

The interaction with clients, investee companies, and/or business partners, to

communicate the environmental or social expectations of the financial institution.

It may consist of setting and communicating environmental or social improvement

objectives amongst companies in the portfolio, requesting information and quantitative

data regarding environmental or social performance and responding to this information

with views about a desired future performance.

Examples of engagement activities may be: monitoring, evaluation and ranking

procedures, questionnaires, surveys, or focus-groups meetings concerning

environmental or social sensitivity or performance of clients/other stakeholders.

4. Documentation

List of the engagement activities performed by the financial institution during the year –

this document should be owned by the CSR /Corporate Governance or Investor

Relations Department.

List of the clients, investee companies, and/or business partners of the financial

institution – this document should be owned by the Sales/Marketing Department.

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Category: Product and Service Impact Aspect: Active Ownership

Indicator #3: Percentage of assets subject to positive and negative environmental or social screening

1. Relevance

The indicator establishes the scale of environmental and social screening practices

relative to the total funds/assets under management.

2. Compilation

2.1 Applicable to organisations with asset management operations.

2.2 Identify who holds responsibility within the reporting organisation or within external

fund managers for environmental and social screening of assets in the portfolio.

2.3 Determine how the reporting organisation uses screening and what classification is

used (e.g. positive, negative, best-in-class etc.) to describe the types of screens

applied.

2.4 Ensure that assets subject to an integrated screen (which includes ‘environment’ &

‘social’ as a factor) are included in calculating the percentages for this indicator.

2.5 Ensure that assets subject to an engagement approach only and not subject to a

screening process (as defined above) are not included in the calculations.

2.6 Report the breakdown of the value of total assets under management at the

end of the reporting period in terms of:

• % of total assets subject to a positive environmental and/or social screen

• % of total assets subject to a negative environmental and/or social screen

• % of total assets subject to a combined positive and negative environmental

and/or social screen

3. Definitions

Environmental Screening

Investment strategies that involve selecting companies on the basis of set

environmental criteria.

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Social screening

Investment strategies that involve selecting companies on the basis of set social

criteria.

Positive screening

An approach that screens companies based on their positive contribution to

environmental [or social] performance. Positive screening can apply minimum criteria

for acceptance or it can take other forms such as “best-in-class” approaches. Best-in-

class screening refers to where the leading companies with the best environmental

and/or social performance in a defined group (e.g. a particular sector, industry group or

on a particular issue (e.g. climate change) are identified and included in a portfolio.

Negative screening

An approach that excludes sectors or companies from a fund based on performance

thresholds (e.g., environmental compliance) or involvement in certain activities (for

example, companies belonging to tobacco or defence industry).

4. Documentation

Fund Managers’ procedures and investment mandates.

List of the environmental and social criteria used by the Research Department and

Fund Managers.

Information owned by the Portfolio Manager:

• Value of the total funds/assets under management at the end of the financial

reporting period;

• Value of total assets subject to a positive, negative, best-in-class environmental

according to the procedure of screening.

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Indicator #4: Voting polic(ies) applied to environmental or social issues for shares over which the reporting organisation holds the right to vote shares or advise on voting

1. Relevance

The indicator illustrates how the reporting organisation uses voted shares of stock

(including proxies) to seek change on issues of concern. It requires details on the

financial institution’s approach to using share voting (including proxies) in the context of


2. Compilation

2.1 Applicable to organisations with asset management operations who have voting

guidelines.

2.2 Identify those investments where the reporting organisation holds the right to vote

or advise on voting.

2.3 Identify what voting policies, principles or guidelines exist or are applied relating to


2.4 Identify what (if any) information on voting guidelines and records are held in the

public domain and the location of this information.

2.5 “Environmental/Social resolutions” can be identified through the wording of the

resolution itself or through references in the supporting statements to an

environmental/social objective and issue. The categorization of resolutions by

proxy services or other external parties can also indicate whether a resolution

constitutes an environmental/social issue.


• If any guidelines exist for voting on environmental or social issues, describe

the primary aspects covered; if these voting guidelines only apply to

subsidiaries in the organization, then this should be stated;

• the location of any publicly available voting guidelines; and

• the location of any publicly available voting records.

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3. Definitions

Proxy voting

The practice where authorization is given by a shareholder for a third party to cast

his/her vote at a shareholder meeting or at another time. It may mean voting in a

particular way so as to deliver a decision that will have some environmental or social

benefit.

Voting Policies

Guidelines that define default positions for the asset manager on specific issues that

might be the subject of shareholder resolutions. These Guidelines may provide a

specific position on a given issue (e.g., support xxx policies on compensation) or they

may simply direct a position to support or oppose management recommendations on

issues.

4. Documentation

Documents owned by the asset/fund manager, risk management or investor relations

department:

• General voting policies and guidelines

• Any general principles applied in voting on environmental or social issues

• Voting appraisal and decision-making procedures

• Results of previous votes on environmental or social issues

29


Indicator #5: Quantitative indicator on voting practices

Question for public consultation:

The working group agreed that proxy voting represented one of the important ways in

which a financial institution exercised its role with respect to sustainability issues.

Indicator #5 requests a disclosure on voting policies. The group then agreed that it

would be useful in principle to have a method to assess in an objective manner the

degree to which those policies and voting rights have been exercised. However, the

group found it difficult to identify an agreed-upon quantitative performance measure.

Therefore, comments and suggestions are invited on both whether it would be useful to

have an indicator to measure the implementation of voting rights and policies as well as

how to measure it. The working group also noted the International Organisation of

Securities Commission IOSCO have best practice guidance for collective investment

schemes on the rights of shareholders. These state that institutional investors should

reference availability of these policies and how proxy voting rights were exercised and

explained. The group identified possibilities such as:

• % of times that proxies were cast according to policies

• the number of times in the reporting period that the organization deviated from its voting policies

• % of proxies that were voted on in the reporting period

• % of proxies that were voted in accordance and % voted on a case-by-case basis

30

Category: Product and Service Impact Aspect: Product portfolio

Indicator #6: Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose

1. Relevance

This indicator is intended to provide insight into the degree to which the financial institution has specifically sought to build social capital to address broad-based needs. Building of social capital has multiple dimensions. On a general level, it can relate to meeting needs of all members of society such as education, affordable housing, etc. On a more specific level, it can focus on the role of financial institutions in helping to support development opportunities for disadvantaged groups and enhance their economic capacity. While all products and services could be argued to offer some form of social benefit, this indicator focuses on those designed with a specific social outcome intended. This gives insight into the priorities of the institution and the ways in which its social contribution differs from other institutions.

2. Compilation

2.1 This indicator excludes asset management since this is reported under indicator #3

(Percentage of assets subject to positive and negative environmental or social

screening).

2.2 Identify those products and services provided by the reporting organisation which

have a social purpose,(e.g. preferential lending, discounted rates etc.).

2.3 Identify any preferential terms or discounts applied (e.g. on interest rates).

2.4 Identify the beneficiaries of these products and services.


• List of products and services broken down by business line (retail banking,

commercial and corporate banking, insurance) for each:

• Purpose and, where relevant, which group

• Monetary value (for products) or number of transactions or customers

(for services)

• The proportion of this value to the total monetary value for each business

line

31

3. Definitions

Products and services designed to deliver a specific social benefit

A product or service that aims for value in the form of transformational benefit that

accrues either to a significant segment of society or to society at large. In particular, an

activity which targets an underserved, neglected, or highly disadvantaged population.

Examples of products and services could include:

- microfinance

- remittances

- securitized credit card

- student loans

- affordable housing

- low interest mortgage

4. Documentation

Documents held by the Sales/Marketing Department, listing:

• the products and services provided by the reporting organisation which apply

special ethical/sustainability criteria

• the beneficiaries of these products/services

32

Category: Product and Service Impact Aspect: Product portfolio

#7: Total monetary value of specific environmental products and services broken down by business lines

1. Relevance

The indicator assesses the relative size of products and services with an environmental

focus in the organization’s overall product and service offerings. These products or

services can have specific environmental impacts and this information provides insight

into the capacity of the organization to innovate new offerings. This data is calculated

independently from the organization’s efforts to integrate environmental risk

assessment into its standard processes for developing and delivering products and

services. This information is particularly relevant when analyzed in terms of year-on-

year trends to assess the development of this product area for an institution.

2. Compilation

2.1 Excludes asset management since these are covered in indicator #3 (Percentage

of assets subject to positive and negative environmental or social screening).

2.2 Identify specific products and services with an environmental focus that are held

across business lines (for example, affinity credit cards, investment funds, trading,

green mortgages, preferential lending for sustainable housing etc.). When

identifying applicable products and services, determine why and how the

product/service delivers an environmental benefit.

2.3 Identify the value of these products and services.


• The total monetary value of specific environmental products and services by

business line

• The proportion of this value to the total value of products and services for

the business line

3. Definitions

Environmental products and services

Defined as products and services designed with an explicit aim to address an

environmental issue(s). For example, this could include products designed to provide

renewable energy, address water scarcity, enhance biodiversity, improve energy

efficiency, etc.

33

For insurance, this includes products designed to minimize environmental risks.

4. Documentation

Records held by sales and marketing groups with individual lines of business.

34

Category: Product and Service Impact Aspect: Product Portfolio

Indicator #8: Percentage of the portfolio for business lines by specific region, size (e.g. micro/SME/large) and by sector 1. Relevance

This indicator provides contextual information on an institution’s portfolio and customer

base, and serves as a starting point for further engagement processes with

stakeholders. The information can provide a proxy for potential of exposure to

environmental and social risks. This indicator is particularly relevant when combined

with information on environmental policies and risk assessment/screening procedures

as applied to the different business lines (see D2).

2. Compilation

2.1 Identify with which sectors, regions and company sizes the reporting organisation is

undertaking financial transactions as part of its business activities. Size applies

only to business lines with commercial customers and refers to microenterprise,

small-and-medium sized enterprises, or large organizations.

2.2 Identify how the reporting organisation determines which sectors and regions have

a potentially high environmental impact. (e.g. World Bank classifications)

2.3 For each sector and region, determine the total value of the portfolio for the

business lines.


• The value of the portfolio for each business line as a percentage of the total

or as a total monetary value based on “on-balance sheet” assets

• The approach used to determine whether a sector or region presents a

potential high environmental impact

3. Definitions

Regions

The World Bank breakdown is the preferred method:

35

• Africa – Sub Saharan

• East Asia & the Pacific

• Europe & Central Asia (Less EU)

• Latin America & Caribbean

• Middle East & North America

• South Asia

• North America

• EU

If the reporting organisation only operates in one of these regions, using a country or

sub regional breakdown based on annual financial reports (e.g. the classification used

in financial reporting), would be preferable.

Sectors

The ISIC sector classification is the preferred method for sector breakdowns. However,

financial institutions may alternatively use the sector definitions applied to their own

annual financial accounts or sector classifications of their local stock exchanges.

Portfolio

Portfolio refers to the total value of products and services per business line.

4. Documentation

Documents owned by the CSR /Corporate Governance, risk management or Investor

Relations Department:

• Assessment procedures for the evaluation and ranking of the potential of a high

environmental impact within a region or sector

• Investment appraisal procedures

36

Category: Society Aspect: Community

Indicator #9: Access to financial services in low-populated or economically disadvantaged areas by type of access

1. Relevance

This indicator starts from the premise that financial services should be reasonably

accessible to all customers within the regions where financial institutions operate. It

covers access to financial services through outlets in low-populated or economically

disadvantaged areas and indication of how this is changing over time through opening

and closure of outlets.

The absence of financial services can result in less capital available to regions, groups,

or individuals to support economic development. Equal access to capital for all

segments of a community or society is also important from the perspective of

maintaining social balance.

Access to branches where transactions can be made remain important for many

customers, particularly those in more remote regions or economically disadvantaged

areas. Remote access to financial services, e.g. through internet generally do not cover

the whole range of financial products, e.g. access to lending. In addition, not all groups

of society are equipped with the necessary technology to use online based services or

equally capable of using technology-oriented access to financial services. The

challenges of providing service to remote regions or areas with poor economic

development can result in institutions providing limited or no service in certain areas,

thus excluding certain customer groups or not offering core financial products. The

indicator should allow readers to help assess the relative commitment of the financial

institution to providing widespread physical access to services for its customer base

within its portfolio and how this access is changing through the opening and closure of

outlets.

This indicator is relevant for retail banking and insurance.

2. Compilation

2.1 Identify the total number and geographic distribution of outlets operated by the

financial institution including the classification of these outlets (ATM, full service

branches, retail outlets etc.)

37

2.2 Identify an appropriate geographic scale of reference for compiling the indicator

based on the breadth of operations of the financial institution. Branches will be

assessed with reference to averages at this scale of reference. For example,

financial institutions that operate only in one state or province may analyze their

branches in comparison to state averages. Institutions that operate nationally or

internationally may choose to use national averages.

2.3 Identify the areas where the institution operates where the population density is

below average, and count the number of branches within the area. Areas should

be identified on the basis of the units used most regularly within the country for

purposes of census or analyzing population distribution.

2.4 Identify the areas that count as economically disadvantaged where the institution

operates and count the number of outlets within this region.

2.5 Identify numbers of outlets opened and closed within these geographic areas

during the reporting period including criteria used for the opening or closure for the

reporting period.

2.6 Branches that are in regions that have both a low population density and are also

economically disadvantaged should only be counted once.


• Percentage and total number of outlets available in low-populated or

economically disadvantaged areas by type of outlet

• The percentage increase and/or decrease and absolute number of outlets in

these geographic areas by type during the reporting period

3. Definitions

Outlets

Outlets include all those physical points of transaction where customers are able to

access the basic financial services provided by the financial institution (this might

include one or more of the following: ATMs, withdrawals or deposits, filing a loan

application, opening or closing a bank account, sending or receiving a remittance or

cashing a cheque.

Economically disadvantaged areas

Regions classified by national or regional government agencies as economically under-

developed (e.g. based on contribution to Gross Value Added or Gross Domestic

Product) or areas where the average wealth of the population is significantly lower than

the average for a region (e.g. based on income per capita).

38

Low-populated areas

Geographic areas with a population density that is substantially lower than the average

for a region.

4. Documentation

The marketing department or other department involved in assessing the desirability of

opening new branches may have information regarding the demographics of the

regions where the financial institution operates.

39

Category: Society Indicator #10: Initiatives to improve access for people with disabilities and impairments 1. Relevance

This indicator starts from the premise that the financial services of an institution should

be reasonably accessible to all of its customers. The absence of financial services can

result in less capital available to particular groups, or individuals to support economic

development. Equal access to capital for all segments of a community or society is also

important from the perspective of maintaining social balance.

Standard service offerings and facilities may not be easily usable by people with

disabilities and/or impairments. This indicator addresses the degree to which the

financial institution has adapted its facilities and methods of providing standard service

offerings to support their use by people with disabilities.

This indicator focuses on initiatives to adapt existing facilities and services to people

with special needs. It is not requesting a list of products and services that might be

relevant or specifically designed for such individuals.

The indicator is relevant to retail banking only.

2. Compilation

2.1 Identify any initiatives implemented specifically to remove these obstacles. This

may include examples such as:

- Providing product information in Braille;

- Making facilities wheelchair accessible e.g. lowering ATM and counter heights;

- Special web protocols e.g. as suggested by the Web Accessibility Initiative;

- Telephone services for customers with hearing disabilities.

Initiatives should be those that are implemented systematically across the

institution or across a significant portion of its operations.

2.2 Gather data on progress against initiatives (e.g. % of ATMs that have been

converted etc.)

40

2.3 Report the list of initiatives to make facilities and services more accessible to

people with disabilities. For each initiative indicate:

• the degree to which it is applied across the institution (e.g., all locations

vs. only one region, all products vs. only retail banking, etc.); and

• progress made against the initiative (e.g. % of ATMs that have been

converted etc.)

3. Definitions

People with disabilities or impairment– Refers to individuals with some form of disability

due to age, genetics, or other causes that limits their physical, sensory, or mental skills.

For purposes of this indicator, this should focus on those people with disabilities who

are still considered capable of managing their own financial affairs.

4. Documentation

Documents that address the degree to which the financial institution has adapted its

facilities and methods of providing standard service offerings to support their use by

people with disabilities. These are likely to be held by the premises or real estate

group(s).

41

Category: Product responsibility

Indicator #11: Actions regarding the design and sale of financial products and services

1. Relevance

This indicator is intended to identify how the reporting organisation:

− Manages potential conflicts of interest between the FI and the customer

− Encourages use of products, services and advice in a fair and reasonable

manner (e.g. high ratio mortgages, pay-day loans, leveraged investments, fees

and rates associated with foreign currency exchange and wire transfers, use of

professional designations, etc.)

− Ensures the responsible marketing and selling to higher risk segments (e.g.

seniors, immigrant customers, financially illiterate, etc.)

This is important because it enables the reporting organisation to:

− Highlight the degree to which corporate and/or personal interests could conflict

with the interests of present or prospective customers

− Understand the extent to which the FI is ensuring appropriate, fair and

responsible use of products, services & advice

2. Compilation

2.1 Applies to products across all business lines including the institutions’ agents and

subsidiaries.

2.2 Identify policies, principles and/or codes of conduct that have been designed to

ensure that the interests of the institution and its employees are aligned to the

interests of existing and potential customers. This could include:

• Product and service design policies, such as those which establish limitations of

certain product features that could place the customer at undue risk (e.g. –

limitations on interest rates, roll-over features, fees, etc.)

• credit risk policies

• conflict of interest policies (e.g. preventing situations where a personal interest

could conflict with the interests of present or prospective customers such as

remunerations packages)

• personal conduct policies

• employment policies, including terms and conditions of employment (i.e. as defined

in employees contracts)

42

2.3 Identify mechanisms to ensure policies, principles and/or codes of conduct are

being implemented and/or enforced (E.g. audits, training programs, professional

qualifications, supervisory controls, remunerations packages, employee

performance goals, etc.)


• Description and scope of these policies, principles and/or codes of conduct;

• Mechanisms for delivering these codes and principles;

• Identify the department(s) that will ensure the implementation of these

policies, principles and/or codes of conduct;

• The location of publicly available policies, principles and/or codes of conduct

and product descriptions.

NOTE: G3 Indicator PR6 will cover marketing and advertising

3. Definitions

Agents and Subsidiaries

An agent or subsidiary is defined as:

• One who is authorized to act for or in the place of the reporting institution;

• A company wholly controlled by the reporting institution.

Business lines

Business lines are defined as:

• Retail banking;

• Commercial and corporate banking;

• Asset management; and

• Insurance.

4. Documentation

Documents describing the policies, principles and/or codes of conduct that have been

designed to ensure that the interests of the institution and its employees are aligned to

the interests of existing and potential customers. These are likely to be held by the

marketing and sales departments within the individual lines of business or within

corporate policy frameworks applicable to the whole organization.

In some cases, these policies or codes of conduct may not be written in formal policies

in which case the reporting organisation may describe unwritten practices or provide

details as to why a policy or code of conduct is not needed and what alternative

approaches are used to ensure that the interests of the institution and its employees

are aligned to the interests of existing and potential customers.

43

Category: Product responsibility

Indicator #12: Initiatives to enhance financial literacy by beneficiary type

1. Relevance

Insufficient financial literacy can result in poor management by individuals and

organizations of their financial resources and inappropriate use of products and

services. For financial institutions, enhancing financial literacy represents an

opportunity to improve the sophistication of their customer base, its ability to use

products and services and to address issues of over indebtedness, social exclusion

and other financial risks.

2. Compilation

2.1 Identify financial literacy initiatives to educate customers and other groups or

communities on financial planning and management.

2.2 Identify the primary target group for each initiative. This may be defined in terms of

demographic characteristics (e.g., youth groups, low-income individuals,

immigrants, employees) or other criteria.

2.3 Report initiatives to enhance financial literacy, and provide the following

information for each initiative:

• Goals of the initiative, including subject areas targeted;

• Main activities related to the initiative

• Target group / beneficiary

3. Definitions

Financial literacy: The ability to understand financial management concepts and to

understand and make informed judgments regarding the use of financial products and

services.

Financial literacy initiatives:

Activities initiated for the purposes of promoting specific products and services of the

institution should not be counted for this indicator. This could include activities related

to:

- the use of the organization’s website;

- financial literacy publications;

- training courses or seminars;

44

- activities initiated in partnership with third-party organizations (e.g., community

groups, etc.)

4. Documentation

Documents which describe the reporting organization’s financial literacy initiatives

which attempt to educate customers and other groups or communities on financial

planning and management. These are likely to be held by the marketing and/or

communication departments within the individual lines of business.

In some cases, these initiatives may not be formal programs in which case the


formal program or initiative is not needed and what alternative approaches are used to

ensure that the financial institution is enhancing the financial literacy of its customers

and other groups or communities.

45

Commentaries on G3

Community Investment

Category: Economic

Commentary on DMA and EC1

Commentary on DMA

The DMA should include an explanation of the organization’s community investment

strategy in association with the data reported on community investment (see EC1 and

related commentary). This should identify strategy elements related to:

- businesses goals for community investment across each community investment

type (see below);

- the intended benefits for the recipient and your business;

- desire/expected outcomes from the community investment activity;

- how community investment activities are identified and management;

- how performance and value for money is assessed.

Commentary on Performance Indicator EC11:

Financial institutions should further report a breakdown of their community investment

by theme (e.g. arts, education etc.) and normalize as a % of pre-tax profit. Community

investment should be calculated by adding:

1. Charitable gifts and donations

2. In-kind staff volunteering

3. In-kind foregone revenues and fees

4. Community partnerships/memberships/subscriptions

5. Management costs

Compilation methodology:

Charitable gifts and donations includes:

Charitable gifts of money or other cash donations. Usually a cash donation to a

charity and with no branding or strategic intent. Cash support for charitable purposes

not directly linked to the company’s community investment or commercial strategies.

Typically in response to an appeal or initiated by management or employee; tend to be

1 EC1: Direct economic value generated and distributed, including revenues, operating costs,

employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments.

46

one-off or at prompt from client. Tax is not counted here as this does not go to the

community investment purpose and may be rebated. Only count cash in hand of

recipient net of any PR or other related costs.

Note: Sums are net of taxation, eg GST or VAT, whether the recipient has tax

deductible status or not.

Matched giving. Where employees or customers raise or donate money and the

financial institution matches with its own contribution. Only the money the financial

institution itself donates is counted, not that contributed by employees or customers.

Any linked PR or hospitality costs are excluded. Any management costs in support of

fund-raising are counted under CCI Management cost.

In-kind gifts or donations � These can include goods, old equipment, or volunteer time. � One off in-kind gifts are treated as a donation, but the contribution is in non-cash

form. � To value contributions one can ask ‘What is it costing the financial institution?’ not

what did it pay originally, or replacement value, or lost profits, or just plain real-time cost. Note that if they have been fully written off, they have zero or scrap value only.

Use of assets, eg company premises or resources for charitable works

Count the cash income foregone where a lettable or saleable resource is given over to

for a charitable purpose.

In-kind volunteering includes:

Volunteer time: Staff participation only in authorised volunteering activities. This must

be carried out in paid company time, not staff time. Count staff hours approved for non-

work activities, either staff or company-initiated, and agreed to before the time is spent.

Calculate this either on formulae that average regional business unit salaries or on

actual payroll figures where the system allows it. Staff’s own time outside work hours is

not a donation by the financial institution, so it cannot be counted as an input.

Secondments of staff to charitable organisations or NGOs or salaries to interns

from them: This is a form of voluntary time and counted as such. If it is a longer-term

engagement it could be better regarded as part of a partnership.

In-kind: foregone revenue/fees includes2:

Foregone fee revenue. Where the financial institution has made an effective donation

by not charging fees or interest to a charity.

2 See question in public comment form related to this section

47

For fees, count the amount that would have been charged if the concerned fees had

not been waived. For low-income earners or charitable groups, this concession is

costed simply as the gap between what was charged, if anything, and what would have

been charged on standard accounts. The assumption is that those customer accounts

would have paid those fees.

Foregone interest margin - Where the financial institution has made an effective

donation by not charging interest or by reducing interest charged on loan balances to

disadvantaged people through a specialised lending program in a community

partnership arrangement.

Similarly to Foregone fee revenue but here the difference between the market rate of

interest normally charged on the loan (based on size plus average creditworthiness)

and the charged interest rate for the reporting period (i.e. 12 months) is measured.

Community partnerships/memberships/subscriptions include:

Contributions which are typically: - longer term (1-5 years), - strategic investments in community partnerships - address specific community issues chosen by the company to fulfil a

business objective, such a culture of engagement and to support staff desires to make a contribution to the communities which in turn support our enterprise.

Commonly they would include partnerships with non-profits or community groups

chosen because of their programs’ relevance to business objectives.

Community partnerships: Partnerships can include cash, time and in-kind so they

may require a more complex report per partnership so that the appropriate information

can then be aggregated.

Memberships and subscriptions to non-profit and community groups.

Management costs include:

Costs associated with facilitating donations of employees. Non-wage administration

costs.

1. Costs associated with facilitating donations of customers and the community.

Non-wage administration costs.

2. Cost associated with managing volunteering. Salaries of staff directly managing

the volunteering, and equivalent cost of salary of IT and other support staff

could be counted here.

48

3. Operating costs (excluding staff). Any outlays that are specifically required to

enable community investment to operate are counted, where they can be

identified.

4. Costs associated with community investment management - direct staff costs.

Full salaries of staff engaged full time in community investment management,

and proportional for part time. All costs to the company other than any tax or

mandatory payments should be counted, as these are outside the CCI test.

5. Costs associated with community investment research and evaluation. Any

outlays that are specifically required to enable community investment to

operate, where they can be identified.

6. Communications costs. Costs that are specifically for community investment

activities and management. Many smaller costs will not be separable from

mainstream accounts.

Violence against employees

Category: Labour Standards and Practices

Commentary to DMA Occupational Health and Safety

Financial institutions should report their policies and practices regarding threats

and violence in place to assist workforce members, their families, or community

members which might occur for example: - attacks and aggressions by customers (verbal or physical) or others - bank robberies (e.g. kidnapping etc.) and - As a result of legal reporting requirements on criminal activities (e.g.

money laundering, terrorism).

Policies and practices include education, training, counselling, prevention, and

risk-control programs.

Human rights Category: Human rights Commentary to HR13

For financial services, “investment agreements” refers the range of financing

agreements that include standard banking agreements such as loans

agreements and underwriting contracts as well as insurance agreements.

3 HR1: Percentage and total number of significant investment agreements that include human

rights clauses or that have undergone human rights screening.

49

For assets under management, report under AM2 if you have any screens that

explicitly include human rights clauses.

Policies and procedures for explicitly dealing with human rights are covered

under D1, D2, D3.

Indirect GHG emissions

Category: Environment Commentary to EN16

Financial institutions should estimate the greenhouse gas (GHG) emissions resulting from their business travel as this represents one of the major direct impacts of financial institutions. This estimate should: · Include travel on behalf of the company or use of the company fleet; · Include the use of courier services; · Exclude commuting. The financial institution should check if the courier service is counting own GHG emissions in order to avoid double counting.

Total material use Category: Environment

Commentary to EN1 Paper represents the most significant material input for the financial sector, and includes: office paper, letterhead/pre-printed forms, envelopes, continuous paper forms, marketing material and publications. For institutions seeking to segment use, an appropriate differentiation includes: · post-consumer recycled; · new fibres ECF/TCF; · new fibres elementary chlorine, · and source of wood fibres (e.g. certified sources).

Total waste by type and destination Category: Environment

Commentary to EN22

The primary types of waste streams for most financial institutions will be paper and waste IT products.

Summary table of changes to the FSSS indicators

Old

Ind.

Original Title Action New indicator

F1 Description of environmental policies

applied to core business lines.

Social component added; moved into new section

following DMA (sector-specific disclosures)

Description of policies with specific

environmental and social components

applied to business lines

F2 Description of process(es) for

assessing and screening

environmental risks in core business

lines.



Description of procedures for assessing and

screening environmental and social risks in

business lines for each policy

F3 State the threshold(s) at which

environmental risk assessment

procedures are applied to each

core business line

Integrated into compilation instruction of F2 -

F4 Description of processes for

monitoring clients’ implementation of

and compliance with environmental

aspects raised in risk assessment

process(es).



Description of processes for monitoring

clients’ implementation of and compliance

with environmental and social requirements

included in agreements or transactions

F5 Description of process(es) for

improving staff competency in

addressing environmental risks and

opportunities



Description of process(es) for improving staff

competency to address environmental and

social risks and opportunities

F6 Number and frequency of audits that

include the examination of

environmental risk systems and

Social component added; new indicator focus Coverage and frequency of audits to assess

implementation of environmental and social

policies and risk assessment procedures

51

procedures related to core business

lines.

F7 Description of interactions with

clients/investee companies/business

partners regarding

environmental risks and opportunities.


following the DMA (sector-specific disclosures)

Description of interactions with clients and

other stakeholders regarding environmental

and social risks and opportunities

F8 Percentage and number of companies

held in the institution’s portfolio with

which the reporting

organisation has engaged on

environmental issues.

Social component added; Performance indicator in

new category on “Products and Services Impact”

Percentage and number of companies held

in the institution’s portfolio with which the

reporting organisation has interacted on

environmental or social issues

F9 Percentage of assets subjected to

positive, negative and best-in-class

environmental screening



Percentage of assets subject to positive and

negative environmental or social screening

F10 Description of voting policy on

environmental issues for shares over

which the reporting

organisation holds the right to vote

shares or advise on voting.



Voting polic(ies) applied to environmental or

social issues for shares over which the

reporting organisation holds the right to vote

shares or advise on voting

F11 Percentage of assets under

management where the reporting

organisation holds the right to vote

shares or advise on voting.

Focus of the indicator changed No new indicator selected. Therefore, no

quantitative indicator will be sent for public

comment.

F12 Total monetary value of specific

environmental products and services

broken down according to

the core business lines

Total monetary value of specific

environmental products and services broken

down by business lines

52

F13 Value of portfolio for each core

business line broken down by specific

region and by sector

Social component added Percentage of the portfolio for business lines

by specific region, size (e.g.

micro/SME/large) and by sector

CSR1 CSR Policy Covered by DMA in the G3 -

CSR2 CSR Organisation Covered by DMA in the G3 -

CSR3 CSR Audits Coverage and frequency of audits to assess

implementation of environmental and social

policies and risk assessment procedures

CSR4 Management of Sensitive Issues Overlaps with Item 4.16 in G3 -

CSR5 Non-Compliance Covered by DMAs and EN28, SO8, and PR9 -

CSR6 Stakeholder Dialogue Overlaps with 4.14 to 4.17 in G3 -

INT1 Internal CSR Policy Covered by DMA in the G3 -

INT2 Staff Turnover & Job Creation Overlaps with LA1 and LA2 -

INT3 Employee Satisfaction Deleted (Applies to all industries, not specific for the

financial sector)

-

INT4 Senior Management Remuneration Deleted (Applies to all industries, not specific for the

financial sector)

-

INT5 Bonuses Fostering Sustainable

Success

Overlaps with the G3 -

INT6 Female-Male Salary Ratio Overlaps with LA14 -

INT7 Employee Profile Overlaps with LA1 -

SUP1 Screening of Major Suppliers Overlaps with DMA, HR1, and HR2 -

SUP2 Supplier Satisfaction Deleted (Applies to all industries, not specific for the

financial sector)

-

SOC1 Charitable Contributions Overlap with EC1 Commentary to EC1 and DMA

SOC2 Economic Value Added Overlap with EC1 Commentary to EC1 and DMA

53

RB1 Retail Banking Policy(socially

relevant elements)

Covered by revised indicator F1 -

RB2 Lending Profile Covered by revised indicator F13 -

RB3 Lending with High Social Benefit Covered by new indicator on products and services

with a social benefit

-

IB1 Investment Policy (socially relevant

elements)


IB2 Customer Profile: Global Transaction

Structure


IB3 Transactions with High Social Benefit Covered by new indicator on products and services


-

AM1 Asset Management Policy (socially

relevant elements)


AM2 Assets under Management with

High Social Benefit

Included in previous F9 -

AM3 SRI Oriented Shareholder Activity Covered by indicator F7 -

INS1 Underwriting Policy (socially relevant

elements)


INS2 Customer Profile Covered by revised indicator F13 -

INS3 Customer Complaints Deleted as not measurable or specific to the sector -

INS4 Insurances with High Social Benefit Covered by new indicator on products and services


-

New Physical Access

Indicator developed Access to financial services in low-populated

or economically disadvantaged areas by

type of access

New Access for Disabled People Indicator developed Initiatives to improve access for people with

disabilities and impairments

54

New Social Inclusion

Covered by new indicator on products and services


-

New Human Rights Commentary developed Commentary to HR1

New Predatory Lending

Topic combined with Responsible Investment and

covered by new indicator on consumer protection

Responsibility regarding the design and sale

of financial products and services

New Responsible Investment Topic combined with Responsible Investment and

covered by new indicator on consumer protection

Responsibility regarding the design and sale

of financial products and services

New Enhancing Financial Literacy Indicator developed Initiatives to enhance financial literacy by

beneficiary type

New Community Investment Commentary developed Commentary to DMA and EC1

New Violence against employees Commentary developed Commentary to DMA Occupational Health

and Safety

New Remittance Services No specific indicator to be developed on remittance

services. The main issue relates to the fee structure

for services, which is a broader question of

responsible lending and consumer protection. See

new indicator on responsibility regarding the design

and sale of financial products and services.

-