Challenge: The Paris Agreement is considered a milestone in the global effort to mitigate the effects of climate change. It aims to limit the rise in global temperature to well below 2° Celsius above pre-industrial levels and has put in place a structure through which countries have committed to implement transition plans to lower their respective greenhouse gas emissions. Since the agreement entered into force in 2016, climate change has continued to be an important issue in both the public and private sectors. How is Credit Suisse addressing the challenge of climate change?
Response: At Credit Suisse, we believe that our role as a financial intermediary is to act as a reliable partner in the transition to a world that is less dependent on fossil fuels and to a low-carbon and climate-resilient economy. In addition to operating on a greenhouse gas neutral basis at all our locations around the globe since 2010, we have continuously strengthened our activities in the area of green finance.
Our principles and our approach to climate protection are set out in our Statement on Climate Change, and they are also reflected in our Group-wide, standardized Reputational Risk Review Process. Within that process, we evaluate factors such as a company's greenhouse gas footprint or its energy efficiency targets, while some of our policies and guidelines require clients to have a plan in place to deal with climate change risks. Furthermore, our sector policies and guidelines include restrictions on the financing of new mining projects to extract thermal coal and of new coal-fired power plants.
In 2018, we established a climate change program with the overall goal of addressing the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD). In that context, we have worked to formalize climate-related governance and definitions in our key policies and risk taxonomy and to define the principles for climate risk strategy and management. We expect our TCFD adoption efforts to provide us with further guidance for the transition to a world that progressively minimizes its dependency on fossil fuels. Moreover, we are working with other banks to develop methodologies for the alignment of credit portfolios with the Paris Agreement.
Challenge: The definitive Basel III regulations were finalized in December 2017. The Basel Committee on Banking Supervision foresees their entry into force in 2022, with transitional periods for certain sectors. The consistent implementation of the agreed standard across different jurisdictions will be crucial to achieve the objective of the capital reforms and to ensure a level playing field. What steps did Credit Suisse take to help tackle this challenge?
Response: In 2018, Credit Suisse – together with other relevant stakeholders – launched a constructive high level dialogue with Swiss regulators and policymakers regarding the implementation of the new Basel III standard in Switzerland. As part of these efforts, Credit Suisse has actively contributed to the development of the implementation process in Switzerland. One of the priorities discussed so far is the objective of harmonized implementation with other comparable financial centers, from both a content and timing perspective. With regard to the implementation in other jurisdictions, Credit Suisse has – together with key policymakers – strongly emphasized the importance of a harmonized implementation approach and level playing field. Through trade associations and direct contacts, Credit Suisse has made the case against the fragmentation of global standards, including by means of a high-level conference in Brussels with key officials that included fact-based reports and analysis on the risks and costs of such an approach.
Challenge: 2018 marked the 70th anniversary of the Universal Declaration of Human Rights that was adopted by the United Nations in 1948. An important point of reference in this area is the UN Guiding Principles on Business and Human Rights, which marked a milestone in the clarification of corporate responsibility for human rights when they were introduced in 2011. What is Credit Suisse's approach to potential human rights issues in its business activities and client relationships?
Response: We strive to assume our responsibilities in the area of human rights in accordance with the International Bill of Human Rights. We are a member of the UN Global Compact, and we actively participate in the Thun Group that focuses on the integration of the UN Guiding Principles on Business and Human Rights into the policies and practices of banking institutions. Our Statement on Human Rights describes the basis of our responsibility to respect human rights and the approaches, processes and tools we use to address this responsibility. Equally, we expect our business partners to recognize and uphold human rights, as stated in our Supplier Code of Conduct.
Credit Suisse's most direct link to human rights issues is in our working relationship with our employees, and this is consequently the area in which we believe we can exercise the greatest influence. In addition, the provision of certain financial services may be linked to negative human rights impacts. While companies operating in sensitive sectors frequently play a key economic role in the global supply of energy and commodities and as an employer, the activities of these companies can, in some cases, have a significant impact on local or indigenous communities. In that context, the rights of indigenous communities may not be sufficiently protected by a state's laws and practices. We apply particular scrutiny when there is credible evidence that the proceeds of a transaction are used for activities which may negatively impact an area used or traditionally claimed by local or indigenous communities.
Using our Reputational Risk Review Process, we perform detailed reviews of business activities and transactions that are sensitive from a human rights perspective. We apply our internal sector-specific policies that include aspects such as the protection of the health and safety of company employees and surrounding communities as well as a commitment to respect the human rights of local populations. Furthermore, to take account of differing viewpoints, we engage in an ongoing dialogue with NGOs and other key stakeholders. For example, our participation in the Advisory Group to the OECD Responsible Business Conduct in the Financial Sector project contributes to the development of best practices for human rights and environmental due diligence.
Challenge: There is a clear need to access new sources of energy, raw materials, and clean technologies to make more balanced and sustainable use of the world's natural resources. Investments that support environmentally sustainable development – a sector known as green finance – are thus growing in importance and scale. How does Credit Suisse contribute to green finance?
Response: Our green finance solutions cover a wide range of asset classes designed to positively impact the transition to a low-carbon and climate-resilient economy, drawing upon the expertise of various specialist departments across our divisions. Our offering in the area of wealth management, for example, comprises a number of funds focused on sustainability, green bond investments and sustainable real estate as well as products and services in conservation finance. In investment banking, we provide advice for buyside and sellside clients in mergers and acquisitions, project and corporate finance, as well as debt and equity underwriting of public offerings and private placements. Credit Suisse actively supports clean and renewable energy businesses and, until the end of 2018, had been involved in over 110 transactions in this field with a value of more than USD 94 billion since 2010. Furthermore, we supported clients on a number of green bond issuances in 2018. In our Global Markets division, Credit Suisse’s HOLT team is working on incorporating data on carbon emissions into its equity research platform, with the aim of allowing investors to assess carbon intensity and carbon-adjusted returns in conjunction with operating performance. Furthermore, Credit Suisse Global Real Estate takes account of sustainability criteria in the management and development of the properties within our various real estate products. Finally, Credit Suisse Energy Infrastructure Partners, an investment manager specialized in investments in the European energy sector, focuses on direct investments in the capital-intensive elements of the value chain, such as energy transmission, generation, storage and efficiency.
Challenge: The coming decade is expected to see a wealth transfer of around USD 30 trillion, with millennials set to inherit a large portion of this amount. This next generation of investors has been found to assign greater importance to the alignment of their investment portfolio with their personal values and ESG considerations. How is Credit Suisse addressing this shift of focus?
Response: At Credit Suisse, we want to be close to our current and future clients and fulfill their needs. According to our research, more than 9 in 10 millennials state that social impact is key to their investment decisions. We therefore offer a broad range of products and services that give our clients the option to align their investments with their values. We strive to consistently expand our offering in this space and find ways to strengthen the infrastructure of the market for sustainable and impact investment products and services. As an example of our efforts to create new products and services that aim to help younger investors reach this goal, we partnered with PG Impact Investments in 2018 to launch an offering that aims to improve the lives of underserved individuals by addressing societal challenges while generating financial returns, with a global strategy that focuses on emerging markets in particular. In Asia, our partnership with RobecoSAM saw the launch of the RobecoSAM Smart Mobility Strategy, which focuses on the electric vehicles value chain. Furthermore, we hosted our first impact roundtable on marine conservation and partnered with the One Young World Summit, where young leaders meet to develop solutions to the world's most pressing issues.