Banking Risk Management and Sustainability
To achieve long-term success, it is essential that we pursue a responsible approach to business. We expect our employees to act professionally, with integrity and in compliance with applicable laws, regulations, due diligence requirements and industry standards. Sustainability issues are an integral part of our risk review process.
It is vital that we operate responsibly and demonstrate a high degree of risk awareness in all our business activities. The appropriate consideration of environmental and human rights-related aspects is therefore an integral part of our internal risk assessment.
How Risks Are Assessed
Credit Suisse pursues a business policy that excludes the provision of services or the execution of transactions that are not compatible with existing agreements or with our own internal guidelines and policies. If there are grounds to believe that a potential transaction could pose an unacceptable risk, Credit Suisse conducts a bank-wide, standardized Reputational Risk Review Process.
Potential risks may, for example, arise due to the nature and purpose of a proposed transaction or service, the identity or activities of a potential client, or the regulatory or political context in which the business will be transacted. Environmental and human rights-related risks are some of the risks considered in this process.
If a transaction poses a significant potential risk of this nature, the internal specialist unit Sustainability Affairs evaluates whether the client's activities are consistent with the relevant industry standards and whether the transaction is compatible with Credit Suisse's policies and guidelines for sensitive sectors.
Based on the outcome of this analysis, Sustainability Affairs submits its findings to a Reputational Risk Approver who is a senior manager independent from the area of business in question, or to the respective Reputational Risk Committees. They have the authority to approve, reject or impose conditions on our participation in a transaction. In cases of particularly complex or cross-regional transactions, the decision may be referred to the Reputational Risk Sustainability Committee (RRSC) or escalated to the Global Reputational Risk Approver. The RRSC, chaired by the Group's Chief Risk Officer, is the most senior governing body responsible for the oversight of review processes and policies and the discussion of reputational risks and sustainability issues.
Certain industries are particularly sensitive from a social or environmental perspective. They include oil and gas, mining, power generation, and forestry and agribusiness, which covers pulp and paper as well as palm oil production. To assess potential transactions with clients in these industries, we have defined specific global policies and guidelines, taking account of standards developed by international organizations such as the UN and the World Bank.
These sector policies and guidelines cover topics including:
- Compliance with industry-specific, internationally recognized standards on the environment and human rights
- Measures to assess and reduce the environmental impact of operations
- The protection of the health and safety of company employees and surrounding communities
- Respect for the human rights of the local population
Our policies also set out activities and business practices that Credit Suisse explicitly will not finance. Sector policies and guidelines are also regularly reviewed and updated to reflect the latest developments and challenges. In 2017, we consolidated our guidelines on power generation, which include restrictions on the financing of new mining projects to extract thermal coal and new coal-fired power plants. We also updated our due diligence framework for shale operations and engaged in discussions about how to more explicitly reflect the rights of indigenous peoples in company policies. Furthermore, we reviewed our risk assessment process with regard to the protection of UNESCO World Heritage Sites.
In addition to adopting international sustainability agreements, Credit Suisse follows voluntary industry standards that set out specific due diligence requirements for certain areas of business. They include the Equator Principles (EP) – a framework for the management of environmental and social risks that is applied by banks when financing major industrial and infrastructure projects and is based on the environmental and social standards of the International Finance Corporation (IFC). Over 90 financial institutions have adopted the EP, thereby committing to review impact assessment reports on related projects before agreeing to provide financing or advisory services. These financial institutions require clients to take concrete measures to mitigate the potential negative impacts of these projects on people or the environment (e.g. by reducing air, water or soil pollution or by consulting with and/or involving the local community). Credit Suisse was one of the first banks to sign up to the EP in 2003, and we are a member of the Equator Principles steering committee as well as the "External Relations" working group within the Equator Principles Association.
Comprehensive disclosure in accordance with the EP3 standard for the financial year 2016 can be found here.
The Challenge of Addressing Complex Issues
We recognize the importance of various industries for the global economy. At the same time, their potential impacts on local communities and the environment need to be taken into account.
From time to time, 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. For example, companies operating in sensitive sectors frequently play a key economic role in the global supply of commodities and energy, as well as being important employers in economically underdeveloped 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 sensitive industries. We strive to meet high standards when examining the related risks and considering the interests of different stakeholders.