Approach & Reporting Challenges & Responses
Credit Suisse was faced with numerous challenges in 2017.
Challenge: How is Credit Suisse responding to the advance of digitalization?
Response: Digitalization is fundamentally altering our industry and is therefore an important topic for Credit Suisse. For example, the evolving digital landscape is one of several factors transforming the way clients interact with their bank. We recognize that innovative concepts are essential to ensure we can continue to offer clients excellent products and services in the future via the channels they prefer. Reflecting our efforts to expand our range of digital products and services along the client lifecycle, Credit Suisse launched Viva Kids in Switzerland in 2017. This new offering includes the digital piggy bank “Digipigi” and two apps, and it aims to increase the financial literacy of children. At the same time, we recognize the potential of digital solutions to drive cost efficiencies across our organization and to support labor-intensive processes. Going forward, we expect the use of digital technology will help the Group to further increase efficiency, to strengthen client loyalty, to simplify global access to our offering, and to address reputational and conduct risks at an early stage.
Challenge: Sometimes Credit Suisse has to make decisions about controversial transactions where opinions about the potential environmental and social impacts can differ widely, depending on the perspective of each party. One such example is the Dakota Access Pipeline – an energy infrastructure project in the US – which attracted a high level of public attention and criticism in 2017. How does the Group address such challenges?
Response: Companies operating in sensitive sectors frequently play a key economic role in the global supply of energy and commodities. They may also be a major employer in economically weak regions. At the same time, we recognize that the activities of
these companies can, in some cases, have a significant impact on the climate, biodiversity, water resources or the inhabitants of a specific area. To identify and manage these risks, Credit Suisse carries out a comprehensive analysis of potential transactions with companies in the energy infrastructure sector and other sensitive industries. We have also defined sector-specific policies based on standards developed by international organizations such as the UN and the World Bank. To take account of differing viewpoints, we engage in a dialogue with NGOs and other key stakeholders, bilaterally or through events and multilateral discussions. Even if opinions differ, we believe that these exchanges encourage each party to see issues from a different perspective and promote mutual understanding. Examples of this dialogue in 2017 include our discussions with NGOs and indigenous peoples’ representatives related to concerns about the Dakota Access Pipeline as well as our hosting of a two-day meeting with banks and society representatives to discuss topics related to biodiversity, human rights and climate change.
Challenge: To make more balanced and sustainable use of the world’s natural resources, there is a clear need to access new sources of energy, raw materials, and clean technologies. The financing of investments that support environmentally sustainable development – a sector known as green finance – is thus gaining 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. In the area of wealth management, for example, our offering 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 has been involved in around 100 transactions with a value of USD 77 billion in the area of renewable energy since 2010. Furthermore, we supported clients on a number of green bond issuances in 2017. 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. 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: Developments surrounding the UK’s expected withdrawal from the EU, the new Administration in the US and increased competition between financial centers shaped the global operating environment for banks worldwide in 2017. How did Credit Suisse contribute to the debate about these topics?
Response: We continued to engage in a constructive dialogue with regulators, policymakers, standard-setting bodies, trade associations and other relevant stakeholders in 2017. As part of these efforts, we published reports on topics including competitiveness and digitalization. We also participated in various working groups aiming at enhanced framework conditions in their respective jurisdictions. For example, Credit Suisse was a member of working groups in Switzerland and also in the UK where the focus was on challenges surrounding “Brexit”. We additionally provided input on proposals about future financial market regulation made by the new Administration in the US.
Challenge: How does Credit Suisse make sure its activities have positive social impacts where they are needed most and, at the same time, are relevant to the bank and its clients?
Response: In a rapidly changing industry and society, we not only adapt to shifting requirements but also aim to play an active role in shaping them. For example, that means identifying trends and concerns at an early stage, designing our programs accordingly and fostering thought leadership on key topics such as financial expertise. In 2017, for example, we joined forces with Pro Juventute, a charitable foundation dedicated to supporting the rights and needs of Swiss children and young people, to publish the first Swiss research study on pocket money in the context of the launch of Viva Kids. This new offering includes a digital piggy bank – “Digipigi” – and aims to increase the financial literacy of children. We also conducted a global research project to examine the most effective approach to improving the financial education and life skills of girls in particular, thus further strengthening our programs and advancing knowledge-sharing on this topic.
Challenge: Make responsible use of resources and ensure that our work is performed by employees in the most appropriate locations. What impact does this have on the structure of Credit Suisse?
Response: In view of the ongoing transformation of the financial services industry, as well as low interest rates and rising costs, we transferred additional services from regional headquarters to our captive Business Delivery Centers (BDCs) around the world in 2017. This meant that we reduced the number of positions in regional headquarters while at the same time moving functions and services to our BDCs, which now account for around 21% of our workforce. Targeted training to further enhance the expertise and management skills of our employees provides increased career development opportunities and helps us to attract and retain the best talent for our BDCs, actively strengthening their role by assigning them functions with greater responsibility.
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. Since the agreement entered into force in 2016, climate change has continued to be an important issue in both the public and private sectors. What is Credit Suisse’s approach to 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 (RRRP). Within that process, we evaluate factors such as a company’s CO2 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. Our updated policy on mining and guidelines on power generation include restrictions on the financing of new mining projects that extract thermal coal and new coal-fired power plants.
Challenge: The Task Force on Climate-related Financial Disclosures (TCFD), established in December 2015 by the Financial Stability Board (FSB), is a business- led initiative to increase the understanding of and transparency on climate change in the financial markets. In 2017, the TCFD published its final report with recommendations for the voluntary reporting on material risks and opportunities arising from climate change. What does the TCFD mean for Credit Suisse?
Response: We expect the implementation of the TCFD recommendations to result in more comprehensive information about the financial impacts of climate change. Due to the complexity of the recommendations, their implementation is expected to take a number of years but is likely to result in more informed investment, credit and insurance underwriting decisions. In anticipation of the TCFD recommendations, in 2016, Credit Suisse piloted an approach to identifying and understanding portfolio-level climate policy risk for our coal mining and power generation credit portfolios. In early 2017, we participated in the consultation on the draft TCFD recommendations, and at the One Planet Summit in December 2017 in Paris, we joined a group of more than 200 companies to publicly express our support for this initiative. We have now established a work plan and a cross-functional project team to start implementing the TCFD recommendations in various work-streams over 2018 and 2019. In order to share experiences on the journey towards TCFD adoption, we have joined the Forum on Implementation of TCFD Recommendations convened by the Institute of International Finance (IIF).