Australia's banks are praised for their social and environmental efforts, but their real world performance on these issues falls short of expectations, a new report has suggested.
According to the 'How Does Sustainable Banking Add Up?' report from not-for-profit policy network Catalyst, there's a significant gap between what the major banks report and their actual performance on a range of sustainability measures.
Part of the problem, said report author and Catalyst Researcher, Martijn Boersma, is that Australia's governance rules allow unsustainable behaviour to be obscured by symbolic efforts. According to Boersma, while sustainability reporting provides an important accountability mechanism, the concern is that what's documented doesn't reflect what's going on in the real world.
"There are many examples that bring into question the voluntary nature of disclosing social and environmental performance," he said. "Self-regulation wins awards, but it has been unable to prevent an erosion of public confidence in these institutions."
On the sustainability issue, the report cites figures from Market Forces stating that at least $134.3 billion in loans have been issued to the Australian fossil fuel industry since 2008, with just over 27 per cent of this sum coming from the big four banks. This, states Catalyst, contradicts environmental best practice.
"The big four have lent $36.7 billion to the fossil fuel industry in Australia since 2008. Yet the level of carbon emissions associated with these loans does not appear in sustainability performance reports. Meanwhile, Australian banks have received significant praise and awards for their sustainability performance, being awarded a number of global awards," said Boersma.
"This points to serious issues in both reporting and the assessment regime. These four institutions wield enormous influence over the Australian economy. It is important that they respond meaningfully to public expectations around social and environmental sustainability and governance."
On the gender pay gap issue, the report points to data from the Workplace Gender Equality Agency, which reveals that full-time female banking employees in Australia are paid 35.2 per cent less than their male counterparts on average – well above the figure for all industries of 24.7 per cent.
Calling for an overhaul of the way that banks report their progress on non-financial goals, Boersma said that a national survey conducted in line with the Catalyst report found that 76 per cent of respondents believe that banks put profits before their social and environmental responsibilities.
In addition, it found that only 26 per cent of respondents believe banks will behave ethically and responsibly if they regulate themselves.
"The government has an important role to play in formulating and safeguarding corporate social and environmental standards. A new corporate governance mandate is needed to bring these other non-financial issues to the centre of business operations," he said.
"These giants of the Australian economy are not only standard bearers but also powerful agents in our markets. It is vital that they close the gap between reporting and reality to restore public faith and improve the sustainability of our economy as a whole."
To this end, the report's recommendations include the following:
- Reformulate company directors’ duties to include social and environmental responsibilities.
- Redefine sustainability reporting requirements and enshrine these in corporate governance systems.
- Found social and environmental risk assessments on the precautionary principle, which shifts the burden of proof towards those parties that potentially cause harm.