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How can banks deliver on UN Sustainable Development Goals?

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How can banks deliver on UN Sustainable Development Goals?

Simon Hill is CEO and founder at idea management firm, Wazoku

CSR and SDGs are major priorities for many banks. Wazoku’s Simon Hill looks at how best to approach achieving these goals.

Simon Hill

Simon Hill

Corporate Social Responsibility (CSR) has been a significant focus for banks and other Financial Services (FS) providers for several years now. The last time that CSR investment was assessed in 2015, the consulting firm EPG revealed that UK & US Global Fortune 500 companies spend $15.2bn a year on CSR activities.

Banks were amongst the biggest spenders in that figure. Since the global credit crisis of 2008 / 2009, they have faced increased regulation to ensure they conduct business in the right way, and also far greater public scrutiny, so the industry has sought to demonstrate that it cares about the wider world and not just profits and the bottom line.

This has been exacerbated by the United Nations (UN) and its 2030 Agenda for Sustainable Development, a ‘global blueprint for dignity, peace and prosperity for people and the planet, now and in the future’. As part of this, the UN announced 17 different but interconnected Sustainable Development Goals (SDGs), adopted by 193 UN member states and all designed to drive change in their respective areas.

It is the responsibility of both the private and public sector in the 193-member states to make each SDG happen, and banks are under pressure to play their part in this. How can banks deliver on UN SDGs while also maintaining their CSR objectives?

The importance of UN SDGs

Introduced in 2015, the UN SDGs are seen as the blueprint to achieve a better and more sustainable future for all and are becoming a major focus in FS as banks look to address challenges relating to poverty, inequality, environmental degradation and much more. Every single initiative counts and every new idea to help solve these issues is valuable. For example, the UN has suggested that if everyone switched to energy efficient lightbulbs, the world would save USD $120 billion, while in 2018, Copenhagen Fintech embarked on a program with non-profit organisation CARE to seek start-ups with ideas in providing loans and cash for the unbanked in Asia and Africa.

At the same time, it has grown ever more important for banks to demonstrate good CSR. Doing good in and of itself is no bad thing of course, but banks do have other motivations. With millennials such a large and important customer group in FS, recent research by Cone Communications revealed that more than 9 in 10 millennials would switch brands to one associated with a cause and also that 87% of millennials would be more loyal to a company that helps them contribute to social and environmental issues.

Demonstrating strong and tangible CSR is therefore important in banking for a whole range of reasons. Tying CSR in with UN SDGs is surely the ultimate goal – but how best to approach it? A simple way to build sustainable initiatives in a bank is to start from CSR and use it as an opportunity to think more globally about societal issues.

A need for innovative thinking and sustainable innovation

For any bank serous about UN SDGs, it should review what has been done before with CSR and look for opportunities to align that with SDGs. More broadly, to really deliver on such important and significant goals, it requires a more inclusive approach involving a range of communities and stakeholders, and the capture, evaluation and implementation of ideas from within a bank. Furthermore, such activity should begin to be woven into the core of what that bank does and is aiming to achieve.

CEOs in FS often talk about ‘innovation’ and the need to be ‘more innovative’ but don’t have a true idea of what that entails and what they really want. To be innovative is vital for both CSR and UN SDGs, but it requires a different culture, different mindset, new objectives and a long-term plan for achievement and measuring success.

Innovation in relation to SDGs cannot be a side-project or something that exists in silo from the rest of the business, otherwise it is doomed to fail in terms of delivering any meaningful change.This is a good starting approach:

A broader ecosystem of stakeholders – anyone can think of an idea that would help improve CSR and address a specific SDG and there should be no limits to creative thinking.Banks should involve employees, partners, customers and other groups as they seek to generate ideas to achieve SDGs. At the same time, SDGs should be tied into innovation programs across these groups.

A culture that encourages innovation – ideas must be discussed, developed and filtered so senior banking staff can focus on the innovations that will really have an impact on SDGs. This means developing a culture of innovation, a long-term approach of collaboration and encouraging diversity of opinion. Those involved must feel trusted and have the time and energy required to innovate, while ideas must be assessed in a way that reflects whatever SDGs the business is championing.

Leadership and environment – the next element to deliver on SDGs is the right environment, which involves strong and committed leadership. Senior figures within the bank must set the tone and make it clear they are willing to take risks and learn from failure. More transparency and collaboration from the off, in terms of what is trying to be achieved with SDGs is vital.The setting of goals is also important. When the overarching objectives are as grand and important as SDGs, incremental goals along the way keep people focused and motivated whilst progress can be tracked.

By aligning CSR with SDGs, a bank can contribute to something that really matters, positioning itself as a sustainable business that cares about the wider world in the process.This all requires a smarter approach to sustainable innovation, going beyond socially responsible one-off initiatives and challenging those in the bank’s ecosystem to think about CSR and SDGs in their everyday lives, fully embedded into the bank’s overall goals.

Banking

ECB stays put but warns about surge in infections

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ECB stays put but warns about surge in infections 1

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.

Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.

But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.

“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.

Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.

Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.

She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.

The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.

MORE STIMULUS?

Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.

Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.

But she signalled those risks were less acute, in part thanks to the recent Brexit deal.

“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”

Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.

“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.

Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.

There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.

The ECB has indicated it may not even need it to use it all.

“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.

Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.

Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.

With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.

(Editing by Catherine Evans)

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Banking

Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger

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Bank of Japan lifts next year's growth forecast, saves ammunition as virus risks linger 2

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and upgraded its economic forecast for next fiscal year, but warned of escalating risks to the outlook as new coronavirus emergency measures threatened to derail a fragile recovery.

BOJ Governor Haruhiko Kuroda said the board also discussed the bank’s review of its policy tools due in March, though dropped few hints on what the outcome could be.

“Our review won’t focus just on addressing the side-effects of our policy. We need to make it more effective and agile,” Kuroda told a news conference.

As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term interest rates and around 0% for 10-year bond yields.

In fresh quarterly projections, the BOJ upgraded next fiscal year’s growth forecast to a 3.9% expansion from a 3.6% gain seen three months ago based on hopes the government’s huge spending package will soften the blow from the pandemic.

But it offered a bleaker view on consumption, warning that services spending will remain under “strong downward pressure” due to fresh state of emergency measures taken this month.

“Japan’s economy is picking up as a trend,” the BOJ said in the report, offering a slightly more nuanced view than last month when it said growth was “picking up.”

While Kuroda reiterated the BOJ’s readiness to ramp up stimulus further, he voiced hope robust exports and expected roll-outs of vaccines will brighten prospects for a recovery.

“I don’t think the risk of Japan sliding back into deflation is high,” he said, signalling the BOJ has offered sufficient stimulus for now to ease the blow from COVID-19.

NO EXIT EYED

Many analysts had expected the BOJ to hold fire ahead of a policy review in March, which aims to make its tools sustainable as Japan braces for a prolonged battle with COVID-19.

Sources have told Reuters the BOJ will discuss ways to scale back its massive purchases of exchange-traded funds (ETF) and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.

Kuroda said the BOJ may look at such options at the review, but stressed a decision will depend on the findings of its scrutiny into the effects and costs of YCC.

He also made clear any steps the BOJ would take will not lead to a withdrawal of stimulus.

“It’s too early to exit from our massive monetary easing programme at this point,” Kuroda said. “Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now.”

(Reporting by Leika Kihara and Tetsushi Kajimoto; additional reporting by Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)

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World Bank, IMF agree to hold April meetings online due to COVID-19 risks

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World Bank, IMF agree to hold April meetings online due to COVID-19 risks 3

WASHINGTON (Reuters) – The International Monetary Fund and the World Bank have agreed to hold their spring meetings, planned for April 5-11, online instead of in person due to continued concerns about the coronavirus pandemic, they said in joint statement.

The meetings usually bring some 10,000 government officials, journalists, business people and civil society representatives from across the world to a tightly-packed two-block area of Washington that houses their headquarters.

This will be the third of the institutions’ semiannual meetings to be held virtually due to the pandemic.

(Reporting by Andrea Shalal; Editing by Chris Rees

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