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.
We consider it vital to operate responsibly and demonstrate a high degree of risk awareness in all our business activities. The appropriate consideration of environmental and social aspects is therefore an integral part of our internal risk assessment.
How risks are assessed
Prudent risk-taking in line with our strategic priorities is fundamental to our business. Credit Suisse uses a wide range of risk management practices to address the variety of risks that arise from our business activities. Reputational risk is among the key risk types considered in that process. Potential reputational risks may arise from various sources, including, but not limited to, the nature or purpose of a proposed transaction or service, the identity or activities of a potential client, the regulatory or political context in which the business will be transacted, and any potentially controversial environmental or social impacts of a transaction. Reputational risk potentially arising from proposed business transactions and client activity is assessed in the Reputational Risk Review Process.
Environmental and social risks are some of the aspects considered in that process. For example, companies operating in sensitive industries 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 local communities. To assess environmental and social risks, our internal specialist unit, Sustainability Affairs, evaluates whether the potential 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. For example, we apply restrictions on the financing of new mining projects to extract thermal coal and of new coal-fired power plants. Our policies also include restrictions of financing activities related to High Conservation Value Forests as well as provisions for the particular scrutiny of peatland operations and the prohibition of financial services for operations in protected areas such as UNESCO World Heritage sites. Finally, our policies also state that Credit Suisse will not finance or advise companies against which there is credible evidence of involvement in grave human rights abuses.
Our sector policies and guidelines are regularly reviewed and updated to reflect the latest developments and challenges. A summary of our sector policies and guidelines is available here.
Further documents guiding our approach to environmental and social issues are our Statement on Climate Change, our Statement on Human Rights and our Supplier Code of Conduct. In addition, we have established a climate change program with the overall goal of addressing the recommendations released by the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) related to external disclosures of climate-linked risks and opportunities.
Credit Suisse has also adopted the Equator Principles – a voluntary risk management framework applied by over 90 financial institutions for determining, assessing and managing environmental and social risk for specific types of finance for industrial and infrastructure projects. The principles set out specific due diligence requirements for certain areas of business, based on environmental and social standards defined by the International Finance Corporation (IFC). Relevant clients are required to take concrete measures to mitigate the potential negative impacts of their 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. 2018 marked the 15th anniversary of the Equator Principles, which over the years have had a strong impact on the project finance market. Also in 2018, the Equator Principles institutions launched a process to update the Principles, and Credit Suisse actively contributed to these discussions. We also continued our active role on the Steering Committee of the Equator Principles and served as the regional representative for Europe within the Equator Principles Association.
Comprehensive disclosure in accordance with the EP3 standard for the financial year 2017 can be found here.