Responsible Banking: From Betamax to Netflix

  • 21 May 2019
  • Blog | Professionalism and Ethics | Regulation & Compliance | Blog

Léon Wijnands, Global Head of Sustainability at ING takes us on a journey through how banks approach sustainability standard-setting.

From Betamax to Netflix: banks’ journey to sustainability standard-setting

How can the financial sector make a concrete impact on the Sustainable Development Goals?
The Principles for Responsible Banking are a very good first step.

Financing the transition that society needs is crucial. You can see that in the Paris Agreement. We hear a lot about article 2.1.a, which is about mitigation, but article b concerning adaptation is equally important, and so is article c, which focuses on aligning finance flows and where banks can make an impact. This is a journey that we at ING embarked on a few years ago.

After the Paris Agreement, we were even more determined to figure out how to align our portfolio with the well-below two-degree goal. But the big question is how: how do you do it, how do you steer it, how do you measure it, how do you report on it?

Working together

We joined with the leading climate measurement think tank 2˚ Investing Initiative to work on a methodology. And once we had an outline, we reached out to the financial community to join us. It was a great feeling when the first four global banks joined ING in pledging to align our loan portfolios with the two-degree goal at COP24. We called it the Katowice Commitment. Now we continue working to expand that group. The idea is to develop a market standard for banks to steer their portfolio on climate goals.

We see a lot of areas where banks are cooperating. This shows that banks are starting to pick up and take their own responsibility. They’re not going to sit and wait until it becomes legislation and compliance but are doing standard-setting themselves. It also shows they are open and willing to collaborate because they create partnerships and coalitions, like the Katowice Commitment. It’s a ‘let a thousand flowers bloom’ approach – lots of ideas in different places, and ultimately you try to bring it all together.

Future focus

There are multiple standards for many other areas of non-financial reporting, which is okay for now. Just think, after Italians invented bookkeeping in the 15th century, it took society centuries to come up with International Financial Reporting Standards as the common language in which we all do financial bookkeeping. And that was with using only one metric, currency. Non-financial reporting has multiple metrics that are very difficult to compare. Of course it’ll take a while before it’s all stable. We live in a society evolving very quickly, I don’t think what we see now will be the standard in a decade. But what we’re doing now is a vital step in getting there.

Just consider this: when we used to talk about movies at home we had video: Betamax, VHS and Video 2000. Then came DVD and Blu-ray, and now everyone’s on Netflix. Would we have Netflix if some visionary people back then didn’t develop all those different standards? I think not.

Simone Dettling, Banking Team Lead, UNEP FI shares her views on responsible banking in the Spring issue of Chartered Banker magazine.