Headquartered in Spain, Banco Santander is a global finance group with significant presence in Latin America, the United Kingdom and the United States. The bank offers a range of traditional financial products centered on its retail banking business.
Banks that offer lending services have significant exposure to the indirect environmental risks associated with their financing activities. In an effort to analyze and 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 (EP).
Banco Santander is a signatory to the EP and has developed sector policies for financing projects in the defense, forestry, water, and energy sectors. The bank has a group-wide social and environmental policy that guides internal mechanisms for analyzing social and environmental risk in its lending. In addition, Banco Santander has a social and environmental risk working group that carries out risk assessments and conducts ongoing due diligence and monitoring associated with its financing activity.
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 for 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 Santander offers various products that provide climate change and resource related benefits. These include a low-carbon credit line to Brazilian farmers practicing sustainable farming methods and financing to companies seeking to reduce their environmental impact through the procurement of electric vehicle fleets.
Direct Environmental Impacts
All financial institutions have a direct environmental impact stemming from their retail branches and headquarters. To minimize a bank’s direct environmental impact, common initiatives include online banking to minimize paper use, energy efficiency efforts for buildings and data centers, and videoconferencing to minimize business travel.
Banco Santander has over 14,000 facilities worldwide and therefore has a relatively large footprint. In order to minimize its impact, the bank launched a plan known as 20-20-15, which is aimed at reducing energy consumption and carbon emissions 20% by 2015 from a 2011 baseline.
Areas for Improvement
United Nations Principles for Responsible Investment (UNPRI) Signatory
In 2008 Santander Brazil’s fund management signed the UNPRI and its employee pension program has embraced the UNPRI as well. However, the bank has not become a group-wide signatory. Portfolio 21 believes by becoming a signatory, Banco Santander can further manage the risks related to its investing and provide additional screened investment opportunities.
ESG Risk Analysis
Santander uses an assessment tool, which considers business activities and environmental management, to assign an environmental risk rating to its retail and corporate clients. The tool is currently only applied to Santander’s operations in Spain. Portfolio 21 has asked the bank to expand the use of the tool on a group-wide basis.
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 6/30/2014 and may not reflect current opinions or subsequent events.