For banks that need to improve, setting out a clear policy is the obvious starting point. But if green finance is to materially improve sustainability, banks need to design and promote products or services with material, measurable impacts on ESG factors. EY analysis shows that while most sustainable finance is designed to deliver tangible improvements, some of the 68 banks in this data set are applying this concept loosely – for example, to initiatives aimed at increasing the adoption of digital banking.
2. Going further on diversity & inclusion
On staffing matters, many European banks perform comparatively well across areas such as employee wellness and having clear policies on human rights. But there is a clear need for further progress on diversity and inclusion.
On average, European banks have female board representation of 32%, but what is more concerning is that the diversity focus is limited in scope, with 14% of banks in the 7 market’s focused on not reporting gender diversity below board level. In addition, EY analysis of European banks reveals limited reporting of other forms of diversity such as ethnicity, sexual orientation or disability. There is clear scope for banks to do more to demonstrate that they are diverse and inclusive workplaces, by improving transparency and reporting levels.
3. Focusing more on supply chains
Suppliers, partners and other third parties have become a major focus of risk management and governance across every industry in recent years. In banking, the growing use of technology vendors has increased third-party risks around the use of personal data. Despite increased focus on mitigation, the Index identifies clear scope for many European banks to strengthen their supply chain policies.
In the environmental arena, only 44% of banks across our seven chosen markets report that they conduct surveys of their suppliers’ environmental performance, and just 16% report or show readiness to end a partnership if environmental criteria were not met. Meanwhile just 21% of banks in this group set out policies focused on avoiding human rights breaches by contractors, a finding that compares unfavourably with disclosure rates in some developing banking markets, such as Brazil and Turkey. However, it is important to note that while not disclosed, this does not imply such policies are not in place, but flags that greater transparency and standardized reporting is required.