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January 25, 2014
ICCR Members Challenge Banks on Ethics and Emissions
    by Robert Kropp

A perusal of shareowner resolutions filed by members thus far reveals requests that banks report on emissions in their lending portfolios and on how to ensure an end to unethical business activities.


Within the next couple of weeks, the Interfaith Center on Corporate Responsibility (ICCR) should be publishing its Proxy Resolutions and Voting Guide, an annual event that serves as an important marker of current shareowner action by sustainable investors. SocialFunds.com will, no doubt, cover the publication of the Guide when the time comes.

But the resolutions filed thus far this year by ICCR members are posted on the organization's website, and a perusal of them indicates that ICCR's vigorous engagement with the banking industry will continue. Too few of the many published accounts of the financial crisis credit ICCR members for their engagement with banks over issues relating to proprietary trading, which began years before the crisis erupted.

“The convergence of so many global crises over the last couple of years has made mainstream stewards of capital pay attention differently,” Executive Director Laura Berry told SocialFunds.com last year.

Two of this year's engagement efforts by those stewards of capital—at least those associated with ICCR—address two critically important aspect of the behavior of large banking institutions. One has to do with climate change. It may not seem intuitive that the financial industry is leading contributor to climate change; after all, their direct emissions are minimal compared to the usual suspects in the energy industries. But there is solid reasoning behind the fact that financial institutions often rank so low in green business rankings. When one looks at the loan portfolios of banks—especially those in the US—one discovers billions of dollars in loans for such as activities as mountaintop removal and the construction of new coal-fired power plants.

ICCR members have filed resolutions with two banks thus far—Bank of America and PNC—requesting that they report on emissions from their lending portfolios. Both banks highlight their sustainability measures in public statements—PNC has “a policy not to extend credit to individual mountain top removal (MTR) mining projects,” while Bank of America was a key player in the development of the recently published Green Bond Principles—but PNC, the resolution continues, “continues to finance four of the top nine MTR coal mining companies.”

And Bank of America has provided $6.4 billion in funding for the coal industry during the past two years alone. “While Bank of America claims to support environmental responsibility, it continues to lead investments in coal, one of the biggest threats to public health and climate stability,” the Rainforest Action Network (RAN) has stated.

Given such glaring inconsistencies, it's no wonder that ICCR's recently published ranking of banks concluded, “Key sustainability issues which impact materiality and long-term risk, such as water and climate change impacts are not systematically taken into account in these companies’ investment decisions.”

In order to address the issue of overall behavior, ICCR members have filed resolutions this year with three banks—Bank of America, JP Morgan Chase, and Wells Fargo, requesting that they report to shareowners on steps the banks have taken to remedy the risks arising from multiple legal and regulatory judgments against them.

Each of the three banks have paid penalties totaling in the billions in the past few years alone, and all three resolutions request that the following issues be addressed:

1. A list of each major legal issue under investigation or settled;
2. The Bank’s reputational credibility problem;
3. Rebuilding commitment to ethics by staff;
4. New checks and balances mandated by the Board and management addressing risk;
5. New structures of Board accountability and oversight;
6. A description of whistle blower protection measures; and
7. The compensation package of top executives and responsible staff involved in or accountable for oversight of these scandals, including the process for clawbacks and positive incentives reinforcing responsible behavior going forward.

 

 
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