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In 2019, Landsbankinn got its first ESG risk rating from an independent party. Investors increasingly demand such independent verification of ESG risk. International rating agency Sustainalytics reviewed Landsbankinn for ESG risk and the Bank received an excellent score, ranking 6th out of 376 European banks assessed by Sustainalytics. The review is comprehensive, encompassing all of the Bank’s activities, and the results show that Landsbankinn is well on its way to integrating ESG and sustainability concerns in its core operation. This was a gratifying acknowledgement of the work the Bank has done and, in addition, a good ESG risk rating can facilitate banks' access to funding.
One of the challenges companies face in relation to sustainability is a business environment that is often too focused on quarterly results. This is not a new challenge but critique of short-term thinking has grown with increased awareness of sustainability harmonising with operating performance. Experience at Landsbankinn shows that steady and on-going effort to achieve sustainability and ESG goals leads to such goals becoming an integral part of all decision making, both in the short and long term.
In fall 2019, Landsbankinn signed new Principles for Responsible Banking at the UN General Assembly in New York. The PRBs will support our work to integrate the Paris Climate Agreement and those three of the UN’s Sustainable Development Goals that Landsbankinn has chosen in the Bank’s operation. It was enjoyable to see so many parties take on long-term responsibility on the sustainability platform - 130 banks signed the PRBs on the occasion.
Participants must set specific, measurable and time-bound goals and regularly publish information about their progress. Landsbankinn has set three such goals, presented in this report. These goals involve assessing emissions from Landsbankinn’s credit and asset portfolios, developing green lending, and working to close the gender-based wage gap and in so doing boost gender equality in the labour market.
Another key challenge to banks is measuring the environmental and social impact of banking through credit and asset portfolios. Banks throughout the world have struggled with measuring such indirect impact effectively and systematically. In 2019, Landsbankinn joined an international venture that aims to develop and implement a harmonized approach to assess and disclose greenhouse gas (GHG) emissions for financial undertakings. The method is intended to allow banks to measure emissions from projects to which they lend funds or invest in.
Over the past two years, the Bank has worked to develop expert knowledge of green bonds and sustainable financing whereby funding is channelled to eco-friendly and social projects. Landsbankinn co-ordinated the issuance of green bonds by Municipality Credit Iceland, which concluded successfully in February 2020. For the first time in Iceland, green bonds were issued at better terms than traditional bonds issued at the same time, demonstrating that investors are engaged and willing to participate in projects run on the sustainability platform. The proceeds from the bond offering will go towards financing environmentally-friendly municipality undertakings that minimise climate change.
Landsbankinn publishes an annual ESG report based on the principles of the Global Reporting Initiative (GRI). This report has been prepared in accordance with the GRI Standards: Core option and also functions as a Communication of Progress report to the UN Global Compact. Landsbankinn will continue to support the Global Compact and adhere to its guidelines.
As both the interest in and onus on corporate sustainability grows, it becomes increasingly important to publish accessible information about the impact of activities on society and the environment in order to facilitate monitoring of developments, comparison and boost transparency. The report provides information on the varied projects the Bank is engaged in under social responsibility, from ensuring equality in the workplace, implementation of the methodology of responsible investment and wide-reaching social projects. The importance of sustainability in corporate activity continues to grow and Landsbankinn intends to continue to lead in the field.
One of the key challenges banks face is to measure the environmental and social impact of banking through credit and asset portfolios.