European banks not ready for environmental, social risks: report

Large European banks are not yet sufficiently aware of the business risks deriving from environmental and social developments, such as climate change, water scarcity or sustainable production, according to a study report issued here on Thursday.

The study, conducted by auditor KPMG with the support of WWF (World Wild Fund), is called "Ready or not: An assessment of sustainability integration in the European banking sector", which underlines how banks have an incomplete appreciation of how major environmental and social developments and trends create risks and opportunities for their corporate clients.

"Many banks lack a broader view of the financial consequences of environmental and social issues, affecting their operations and corporate clients,'' says Barend van Bergen, partner at KPMG Sustainability.

According to Barend, on the other hand, with financing activities which affected the natural resources of the planet, banks also could create negative impacts on people and society.

The study on 12 large European banks shows that banks are adopting a quite narrow approach to sustainability issues, focusing on whether or not they want to finance certain activities.

"The study shows that the banking sector at large does not yet have an adequate strategic response to manage material business risks linked to environmental and social realities," said Maria Boulos, Director of Corporate Engagement at WWF International.

The study suggests that banks need to more thoroughly evaluate the extent to which environment and social issues might cause financial risks for their clients and to how they might impact their financing needs.

"For instance, companies in the energy sector are facing growing financial risks as renewable energy is becoming more competitive," said van Bergen, adding that this could have a significant impact on the creditworthiness of conventional energy companies. Endit