Banco Bradesco’s principal activity is to provide banking and financial products and services in Brazil to individuals, small and mid-size companies, and major local and international corporations and institutions. The company operates its retail segment through more than 4,500 branches, which serve all levels of the population, as well as over 43,000 correspondent sites.
Impacts and Opportunities for Banks
Banks that offer lending services have significant exposure to the indirect environmental risks associated with their financing activities. In order to analyze and attempt to minimize these risks, banks should have strong environmental and social policies and assessment tools. Banks involved in project finance should also participate in industry initiatives such as the Equator Principles.
Banco Bradesco is a signatory to the Equator Principles. The bank also uses tools such as the Integrated Biodiversity Assessment Tool (Ibat), created by the International Finance Corporation, to evaluate and monitor environmental risks. Additionally, Bradesco participates in the Biodiversity for Banks program, an initiative coordinated by the Business and Biodiversity Offsets Program, Equator Principles and Worldwide Fund for Nature, which seeks to assist financial institutions in the challenge of evaluating risks to biodiversity and ecosystem services in credit decisions.
According to a 2012 Global Sustainable Investment Alliance report, at least $13.6 trillion worth of professionally managed assets incorporate environmental, social, or governance (ESG) concerns into investment selection and management. ((Global Sustainable Investment Alliance. “2012 Global Sustainable Investment Review.” January 2013. Accessed March 12, 2014. http://gsiareview2012.gsi-alliance.org/pubData/source/Global%20Sustainable%20Investement%20Alliance.pdf))
Banco Bradesco offers four investment funds that utilize ESG criteria for investment. These funds invest at least 67% of net equity in the shares of companies listed on BM&FBovespa’s (Brazil’s largest stock exchange) Corporate Sustainability Index. Additionally, in 2010 Bradesco Asset Management became a signatory to the Principles for Responsible Investment.
Green Product Offerings
Beyond e-banking services, banks can encourage environmental stewardship through their products and services. For instance, banks can offer green mortgages with better rates or terms to buyers with energy efficient homes. Green credit cards can be used to support local charities and green checking accounts may reward customers with higher rates for personal behaviors that reduce individual impacts.
Banco Bradesco offers a number of products with environmental and/or social benefit, including credit cards, savings bonds, investment funds, and credit lines. For example, the bank offers affinity cards in which the bank passes on part of the annuities to partnering philanthropic organizations. Bradesco also maintained a portfolio of environmental and social credit lines that totaled $770 million in 2012. The company’s environmental credit lines include environmental leasing, forestry working capital, and sustainable agriculture ventures.
Areas for Improvement
ESG Risk Analysis
In recent years there has been an uptick in high environmental impact lending across the banking industry ((MSCI ESG Research. Industry Report: Banks. February 2013. )). While participation in industry groups, such as the Equator Principles, and the use of risk assessment tools, such as Ibat, are useful in mitigating risk, Portfolio 21 believes the use of sector financing policies is crucial. Banco Bradesco does not currently have sector financing policies.
Banco Bradesco publishes a sustainability report, however, it does not provide absolute metrics for its key impact areas or set on-going reduction targets. Portfolio 21 would like to see the bank take this additional step in its environmental accounting.
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 7/31/14 and may not reflect current opinions or subsequent events.