Banks and Sustainable Financing: Findings from the Lithuanian Case Study
This blog by Kęstutis Kupšys, Vice-President, Lithuanian Consumers Alliance follows on from this earlier piece in September, which outlined the results of the first policy assessments carried out on Lithuanian banks, which concluded in in July 2021.
While the first study examined five topics, those of Climate Change, Nature, Human Rights, Gender Equality, and Labour Rights, this second study analyzed how the banks improved in the five topics and researched four new topics; Tax, Health, Corruption, Animal Welfare.
The studies are expected to encourage banks operating in Lithuania to conduct their financial operations in a more sustainable manner, considering ESG (environmental, social and governance) principles and to promote efforts to reduce the financial sector's negative impact on the environment and society.
The results of both studies are given below. The first table presents the final results of the study in nine topics. The second table presents the results of the first (July) and second (December) research on five topics, with a noticeable change due to updated sets of policies by several banks.
Table 1. The final 2021 results of the December evaluation on a ten-point scale (9 topics).
The first table shows that Swedbank (5.9) and SEB (5.6) collected the highest average of all topics in the December research. In third place, Luminor scored 2.3 points out of 10. In the fourth place was Šiaulių bankas (0.6), fifth – Citadele (0.4), and sixth – Medicinos bankas with 0.1 points out of 10.
Table 2. Comparison of the five research topics between the first (July 2021) and second (December 2021) studies (ten-point scale).
Compared to the results of the topics from the first study (Table 2), the scores from the second round of research were higher. The most significant change is seen in the case of Luminor Bank (plus 2.2 points). There is also a considerable change in SEB (1 point up) and Swedbank (improvement of 0.5 point). The result of Medicinos Bankas increased by 0.3 and that of Šiaulių bankas by 0.1. Citadele Bank's result remained at zero.
The leap by Luminor Bank is explained by the renewed comprehensive sustainability policy, which was published in December 2021. The increased rating score of other banks was also influenced by the updated policy documents.
Conclusion and Recommendations
During the first study, it was noticed that from among the main banks operating in Lithuania, only two banks were active in all of the studied topics (SEB and Swedbank). In the course of the second study, almost all banks were active (with the exception of Medicinos Bankas, which is currently in the process of being sold). As in the first study, some banks indicated that they publish information related to certain sustainability topics in the bank's internal documents. Unfortunately, this information was not evaluated because the study's main purpose is to evaluate publicly available information that would be easily accessible to consumers. Just like in the first study, the banks with the highest scores were international, while the lowest scores came from Lithuanian banks (except Citadele). This could mean that larger banks in international networks are more receptive to global sustainability concerns. However, smaller banks can very easily bridge the gap by actively pursuing strategic change and introducing firm policies that promote sustainability in their operations.
Based on the results of the study, the following recommendations are made to banks:
1) ensure that environmental, social, and governance (ESG) factors are widely implemented, properly described and enforced in accordance with accepted internal policies throughout the Bank's operations;
2) specify which sectors of banking activity (e.g. lending to certain economic activities) are subject to publicly available information indicating the banks’ sustainability policy. We also propose to separately identify the documents (policies) used for banks' own investments and for client financing;
3) provide clear, comprehensible, public information on applicable sustainability policies to customers and consumers;
4) actively develop and implement sustainability policies in line with international standards;
5) contribute to the creation of a sustainable financial sector ecosystem;
6) encourage the search for new talent and employees for work on sustainable financing issues in banks.