Controversies and partnershipGo down
Landsbankinn's ESG reports for recent years have focused on development in the Bank’s branches, sexual harassment in the workplace, sale of companies by the Bank, supply chain responsibility, interest margins and pricing. The reports have also focused on changes in the banking environment, the new directive on payment service and data protection laws, challenges relating to human resources, cyber security and increased demand on sustainability from the investor side.
This year’s report will focus on two issues; the measures banks can take to be socially responsible and the sustainability certification of Landsbankinn’s new facilities.
The main challenges banks face in the integration of the ideology and methodology of sustainability in their operation is to identify areas where they can most effectively achieve results through core operations. It is also challenging for companies to practice long-term thinking and apply that vision in business activities. It is necessary to adopt a long-term approach in corporate processes to achieve the best results for the environment, society and operations.
Until recently, banks were considered to have a small environmental footprint as their activities were not thought to produce GHG emissions to any significant degree. As standards evolve and ESG requirements become more sophisticated, it is now generally accepted that banks have a high impact on their environment and produce emissions through their credit and asset portfolios. Banks must contribute to society’s effort to achieve the goals of the Paris Climate Agreement and the opportunities lie in the projects they choose to finance and invest in rather than in direct activity. Such indirect emissions are difficult to identify and measure.
The Partnership for Carbon Accounting Financials (PCAF) is working to develop a harmonized approach to assess and disclose greenhouse gas (GHG) emissions for financial undertakings. The carbon accounting method is intended to allow financial undertakings to measure and analyse emissions from their credit and asset portfolios. Landsbankinn participates in the development of the method. The project originated in the Netherlands and PCAF carbon accounting systems have already been developed for domestic financial undertakings and North-American banks. The PCAF ideology is primarily based on the GHG Protocol, adapting that methodology to the credit and asset portfolios of banks. For more information on the project, click here.
There are several avenues open to banks to measure the impact of their credit and loan portfolios, such as TCFD, CDP and the aforementioned GHG Protocol, but each bank must decide which method best suits its operation. It is nonetheless important to consider the methods and standards selected by other banks and financial undertakings, as investors need to be able to review information that is comparable across financial undertakings.
In addition to environmental factors, banks must consider social factors and governance practices when evaluating the impact of their operation through credit and loan portfolios. This is increasingly done through sustainable financing, whereby funding is systematically channelled to environmentally and socially positive projects. There are indications that investors are prepared to fund environmentally friendly projects on more favourable terms than other projects. In order for sustainable financing to be successful, ESG must be an integral part of a bank’s core operation and daily decision-making. It is key to banks, as to other companies, to maximise their impact by integrating sustainability in core operation.
Landsbankinn is currently engaged in constructing a multi-purpose commercial and office building at Austurbakki in central Reykjavík. The new building will be rated under the BREEAM standard. BREEAM is the world’s leading sustainability assessment method for construction projects and the assessment system most used in Iceland, with nigh on thirty domestic projects currently rated or in the process of being rated by BREAAM. The aim is to achieve an “excellent” rating, most notably for design and construction of the Bank’s building, matching the highest ratings given in Iceland.
The sustainability certification of Landsbankinn’s new building supports and aligns with the Bank’s CSR policy. It is the logical continuation of the Bank’s current efforts under CSR and sustainability. The Bank continuously aims to improve its operation and environmental concerns are of high importance.
It is sensible to invest in buildings that support well-being and consume less energy, require less maintenance, have a longer lifetime and utilise less amounts of harmful substances. The health and well-being of the building’s users is vital, regardless of whether a building is for business or residential purposes, and factors that support good in-use and a healthy environment should be emphasised.
The aim of sustainable design is to systematically boost quality and reduce negative impact. The main scope for creating value during the various stages of a building’s lifetime is during the preparation and design phase, where strategic decisions are made. Design of sustainable buildings must consider the impact of their entire life cycle, from resources used and production of building material, to the construction process, operation and, finally demolition and waste treatment.
A sustainable building must be based on the methodology of sustainable development that seeks to fulfil the needs of current generations without reducing the possibilities of future generations to do the same. Sustainable construction is based on eco-friendly methods, effective use of resources and reducing negative environmental impact throughout the entire life cycle of the building.
Sustainability certification of buildings aims to increase quality, reduce the negative impact of construction on the environment, produce health-promoting and safe constructions and reduce the overall cost of buildings during their lifetime. The motivators for choosing sustainable construction are environmental, financial and health related.
|Environmental motivator||Financial motivator||Health-related motivators|
|Reduced energy consumption||Favourable funding||Healthier interior|
|Reduced use of harmful substances||Lower operating cost||More wholesome and secure building|
|Reduced waste||Investment retains its value||Users can manage their environment|