We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.

PLEASE NOTE: The Implementation Guidance is being updated following the completion of the Consultative Process, the below is the original draft version.

Implementation guidance for Principle 3: Clients and Customers

Key words and intent: creating synergies; encourage sustainable practices; enable sustainable economic activities; responsibility towards clients and customers

Banks are vital economic intermediaries and as such can achieve some of their most significant contributions to society’s goals by creating synergies with customers and clients, encouraging sustainable practices and accompanying their customers and clients in their transition towards more sustainable business models, technologies and lifestyles. Beyond contributing to shared prosperity for current and future generations, enabling sustainable economic activities in this way presents a clear business case for banks: clients that are shifting to sustainable business models and technologies are better prepared for emerging regulations and better positioned to succeed in our changing economy and society. Accompanying its clients in their transition enables the bank to have a stronger relationship with those clients, ensuring the bank is the preferred partner to cater to thriving clients’ growing investment needs and benefits from its clients’ improved financial performance, i.e. lower default risk.

A strong relationship with its client and customers built on trust is crucial for any bank’s success. A bank thus needs to ensure it behaves responsibly towards its clients and customers at all times and puts their clients’ best interest first.

  • Systematically identify where your bank could support its clients in reducing their negative and increasing their positive impacts by adopting new technologies, business models and practices. Identify where your bank could encourage and support sustainable behavior and consumption choices among its retail customers.
  • Develop strategies and define measures/actions for the identified focus areas for working with your clients. Such measures or actions could include:
    • raising awareness, engaging customers and clients and providing advice,
    • encouraging customers to improve their social and environmental impacts and adopt robust sustainability standards and asking clients for information on their significant environmental and social risks and impacts,
    • developing new products and services that encourage and support more sustainable business models, technologies, practices, lifestyles,
    • incentivizing sustainable investments and choices,
    • including sustainability-related conditionality in contracts.
  • Help ensure that your retail customers have the knowledge and skills to effectively manage their finances, e.g. through financial literacy programs, and banks can consult customer advocacy organizations on their practices and products.

Getting started…

  • Educate and proactively communicate with clients and customers about your commitment to sustainability and to responsible banking.
  • With clients:
    • Map your clients (e.g. corporates, SMEs, cities) on a sector-by-sector basis. For each major grouping, identify the sustainability impacts, positive and negative, that these clients need to manage and where your bank could play a role in supporting these efforts.
    • When undertaking routine client engagement (e.g. onboarding, Know Your Customer (KYC) reviews, transaction assessments), identify where new or existing financial solutions may play a pivotal role in fostering existing and potential sustainable practices. These practices could include:
      • energy efficiency, production or use of renewable energy,
      • low carbon transportation, smart building and cities,
      • responsible water and waste management, circular economy,
      • local / sustainable / organic products, conflict free and/or child-labor free and/or deforestation free resources,
      • based on your analysis of your clients, develop a strategy, identify measures/ actions to take, such as creating new products and services.
  • With retail customers:
    • Map your retail customers and for each major grouping identify the existing and potential sustainability-related behaviors and actions where your bank may provide them with support and/or incentives. Also, identify retail customer segments with low financial literacy and potential retail customer segments that are under-serviced by banks.
    • Based on your analysis of your retail customers develop a strategy and identify measures/actions to take. For example, you could consider offering access to basic financial services and offers directed at and adapted to the social “bottom of the pyramid”, such as microfinance, savings and investment products for low income earners or rural communities. Alternatively, your bank could proactively finance and incentivize sustainable energy use through green loans for home insulation or the use of renewable energy, or carbon offsetting.
  • Build capacity among bank employees to engage customers on sustainability issues. Establish policies/guidance for advising clients/customers on sustainability issues.

Ensuring continuous improvement…

  • Involve clients and customers as stakeholders in what your bank should be doing; systematically engage customers on sustainability issues and review specific products and services to ensure they meet their needs. Integrate questions on your customers’ sustainability preferences in the on-boarding process.
  • Build up expertise within the bank, or through partnerships with other organizations to effectively advise clients and customers on adopting more sustainable business models, technologies, lifestyles. Ensure that client managers’ incentives are aligned with the banks’ responsible banking strategy and objectives.
  • Develop appropriate incentives for clients and customers to make more sustainable investments and choices. This can be through preferential interest rates, bonus programs rewarding sustainable consumption choices, etc. Create a race to the top among clients and customers, offering more attractive interest rates/conditions/ services for sustainable clients and customers.
  • Establish business partnerships to deliver solutions for sustainable production and consumption beyond your bank’s current client base, e.g. with technology providers.
  • Harness technology to innovate and provide sustainability-related products.

a. Changing business practices with the aim of stopping child trafficking
A European bank, concerned about the refugee crisis, decided that one of its major contributions would be to ensure that it was not in any way, directly or indirectly, complicit in enabling child trafficking. The goal is an ambitious and demanding one and the bank does not yet have all the answers. But, by linking this to its core banking systems it has identified the following actions:

  1. Using improved systems to track and trace illicit funds,
  2. Improving due diligence and Know Your Customer procedures before accepting clients,
  3. Acknowledging privacy legislation and online anonymity as major challenges,
  4. Tracking and reducing suspicious transactions,
  5. Working with its peers to clean up the banking sector on that topic,
  6. Working as an industry to use big data to identify trends.

This activity links to SDG 8 (decent work for all) and indicator 8.7 in particular, and SDG 17 (partnerships for the goals). See the full example.

b. Enhancing energy transition and social issues in line with the country’s needs
A leading South African bank gave effect to its commitments to sustainable development finance in 2017 through numerous activities including: approximately US$ 1.3 billion in utility-scale renewable energy finance that added a further 2100 MW to the national grid; through designing a “Smart Living Solutions” product to educate clients and give them access to revolving or advance facilities for financing renewable energy solutions for their homes; through providing approximately US$ 9 million in new funding for green buildings; through its Green Savings Bond which attracted US$ 700 million in new savings in 2017 (US$ 352 million since inception) as well as investing in ensuring greater access to finance for black entrepreneurs previously underrepresented in the economy; increasing its financing of affordable housing, providing circa US$ 58 million in 2017; student accommodation and student loans. Progress is reported in its Annual Integrated Report, which is third party assured.

c. Increasing financial literacy for retail customers in developing countries
A bank focused on retail customers in emerging economies might create the most positive impact by increasing financial literacy and access to appropriate and affordable services while also taking care that remuneration incentives within the bank don’t unintentionally encourage overselling to people (e.g. to seasonal workers whose livelihoods are uncertain). One example is from Turkey, where a bank has partnered with the Government to support financial literacy sessions for families and households. Several hundred thousand persons have been trained since the inception of the initiative.

d. Supporting individuals to achieve insulation works or renewable power production in buildings
A bank with a mortgage book, commercial property or infrastructure business lines might set a target to increase the capital it has allocated for renewable energy or energy saving technologies and might promote this to clients. One example is an EU bank which has partnered with an incumbent EU energy player to propose a comprehensive offer to individuals that allow them to finance – with a dedicated premium loan issued by the bank – and achieve the efficient insulation of their housing.

e. Sustainability-linked loans to corporates
Banks could offer “sustainability-linked loans” or “positive impact loans”, where some of the terms could be linked to corporate progress on sustainability (e.g., discounts could be provided based on the use of the funds or the realization of certain sustainability-related targets).

f. Financial Inclusion in Turkey through the use of technology
On the messaging application and conversational service of the biggest mobile telecom operator in Turkey, a bank enables its customers to transfer money to unbanked or underbanked people, solely by entering the receiver’s phone number. This enables unbanked/ underbanked people to benefit from financial services.

g. Enabling Financial Inclusion through Technology

Enabling disabled people to access financial services is a key component of many financial inclusion initiatives. For example, ATMs can be designed for use by visually impaired customers, and many Internet Banking and Mobile Banking services have been made compatible with screen reader software, enabling audio transactions for disabled customers.