Charting a Course to Sustainability
Standard Bank, Africa's largest bank by assets, has its roots deep in South Africa, where it was founded in 186218/03/2010
In South Africa, as elsewhere in Africa and the emerging markets, Standard Bank faces challenges that extend far beyond the provision of financial services. Addressing poverty, unemployment, true equality and environmental challenges are part of the search in emerging markets for a more sustainable future.
The global recession hit South Africa’s economy hard, leading to nearly one million jobs being lost in 2009. However, Standard Bank managed to maintain stable employment. The turmoil in the global financial markets has highlighted the importance for the group of focusing on sustainable development opportunities.
Standard Bank’s vision is to be a leading emerging markets financial services organisation. To achieve this vision, the bank’s sustainability strategy has been aligned with core business objectives, whilst taking into account global sustainability challenges. Ultimate accountability and responsibility for sustainable development rests with the board of directors, but in 2009 the bank formalised its sustainable performance by creating a group∞wide sustainability management function to lead the organisation in dealing with pressing global issues such as climate change, poverty, dwindling water resources, and the need for higher economic and environmental efficiency.
Being a good bank is the first step to sustainability for the group. Standard Bank, as a financial services provider, operates in one of the most heavily regulated sectors in South Africa, and therefore compliance and accountability are a priority for the bank. International best practice is taken into account in the development of the group’s compliance framework. Included in this framework are the principles of effective compliance risk management issued by the Basel Committee on Banking Supervision. The bank has increased its investment in employee training of regulatory requirements and continues to recruit qualified risk professionals to ensure legislative requirements are understood and adhered to.
In terms of the Basel II requirements relating to banks, minimum disclosure on the capital adequacy of the group is required on a quarterly basis. Standard Bank Group remains well capitalised. As at end of September 2009, capital adequacy of 14.4 percent and Tier 1 capital adequacy of 11.9 percent significantly exceeded minimum regulatory requirements.
The bank participates in sustainability indices to benchmark its economic, social and environmental performance against local and international banks and to identify areas for improvement. Standard Bank and its insurance subsidiary, Liberty, were included in the Johannesburg Stock Exchange’s socially responsible investment index in 2009. Of 109 companies assessed, 67 were included in the index. For the third consecutive year, Standard Bank was a top performer in the low environmental impact category.
Standard Bank recognises that its operations have a direct impact on the environment. This can arise through the consumption of energy and other resources used in daily business activities, or through the group’s supply chain. In the financial sector, the indirect impact on the environment outweighs the direct impact of operations, which by nature have a lower impact relative to other industries.
Standard Bank has initiated a number of projects to improve the management of resources such as energy and water and the reduction of carbon emissions and waste. The bank has also joined the Green Building Council of South Africa, and will ensure all new buildings owned by Standard Bank will be designed, built and operated in an environmentally friendly way. When designing new buildings, the bank follows the Green Star SA rating system, which assesses the environmental performance of buildings, taking into account energy and water consumption, material used, and site emissions. It also encourages employees to be energy efficient, not just in the office, but in their personal lives as well.
The bank adopted the Equator Principles in 2008 as part of its commitment to socially responsible and sound environmental management. As a signatory to the Equator Principles, Standard Bank is bound to ensure that the project finance customers to whom it lends capital evaluate and actively avoid, manage or mitigate the social and environmental impacts of the projects for which they require financing. The bank has developed and implemented procedures to support the Equator Principles.
Standard Bank’s carbon trading capability covers a number of emerging markets as well as the European Union. It has been actively involved in the international carbon market since 2003, and recently bought carbon dioxide emissions reductions resulting from three newly built hydropower plants located in northeastern China. In 2009, the bank and the United Nations Environment Programme (UNEP) launched the Africa Carbon Asset Development facility, a public-private partnership between UNEP and African banks that aims to stimulate the growth of Africa’s carbon market through investor outreach and seed capital. The programme focuses on engaging Africa’s financial sector in developing the regional carbon market.
Also in 2009, Standard Bank cemented its credentials as a major player in the carbon market by being awarded, with Camco International Limited, the Carbon Finance Deal of the Year award from Environmental Finance magazine. The deal was presented for an innovative 5.8 million ton certified emission reduction structured distribution and 15m euro advance payment arranged by Standard Bank for Camco, a climate change business and carbon project developer. The distribution was four times oversubscribed, reflecting the success of the deal.
The quest for sustainability requires Standard Bank to not only think about environmental dimensions, but also the social and economic factors that affect business. The bank believes it makes business sense to uplift communities that have been held back economically due to lack of access to financial products. To this end, the bank is implementing a number of initiatives to extend banking to millions of South Africans previously excluded from the formal financial services sector.
Standard Bank’s Community Banking division has been developing sustainable micro-banking capabilities for the informal market in South Africa. The division has developed an affordable transactional account for low-income earners, a lending offering for informal business, and consumer education programmes. The bank also provides services aimed specifically at black small and medium enterprises. Among these services are leveraged financing, contract finance and franchising. Standard Bank also works with the South African government and key development finance institutions in this regard.
Standard Bank and the government also work together, along with other banks, to provide access to affordable housing finance for low-income customers in South Africa. It also has self-imposed targets to ensure that the needs of this market are met. Property prices in the country spiraled over the past decade, resulting in low-income earners being left out of the property market as they earned too little to access housing finance. By creating products and taking part in initiatives that assist these low-income earners, Standard Bank has been able to not only assist the government in providing housing to those who have previously been unable to get homes, but has also extended the bank’s customer base. In addition, residential developments undertaken by the bank take social and environmental imperatives into consideration.
Corporate Social Investment is another vehicle Standard Bank uses to commit funding and other resources to create long-term social values in the communities the bank operates in. All CSI activities are underpinned by sound business rationale aligned with business objectives with the aim of creating meaningful mutual benefit. Through CSI the bank promotes social stability and economic mobility that benefits the bank’s long-term sustainability. CSI offers an opportunity to drive positive change and mitigate risk in areas that are generally marginalised. In South Africa, the bank’s CSI spending has been focused on education, enterprise development, and health and wellness.
Education plays a critical role in the future sustainability and economic development of South Africa, hence the bank’s decision to focus most of its CSI spend in that area. Standard Bank participates in a partnership with the government to turn identified schools in disadvantaged communities to centres of excellence in maths and science. Standard Bank helps these schools by initiating programmes which ensure the pupils and the surrounding communities have the resources and support they need to ensure they can focus on the education of the youth. These programmes include feeding schemes and community farming projects.
One of the projects aimed at enterprise development is Standard Bank’s community investment partnerships. The bank has established eight community investment funds that offer micro-loans to informal businesses. Standard Bank grants the funds to selected local community institutions such as co-operatives, non-governmental organisations and trusts. These funds are administered by those institutions, which identify recipients within their communities. The recipients receive the funds as loans. Standard Bank derives no income from this initiative as the repayments are reinvested in the community-based funds. By December 2009 more than R19m had been disbursed to 1,121 entrepreneurs in previously marginalised communities. Nearly 70 percent of the loans have been awarded to women entrepreneurs.
Standard Bank has developed a number of HIV/AIDS awareness programmes, and has partnered with various institutions that offer a wide range of services from counselling and testing, to providing treatment, care and support services. The bank’s employee health and wellness HIV/AIDS programme has had spinoffs for the community at large. For every employee who gets tested, the bank will sponsor the counselling and testing of a member of the public in disadvantaged communities. In addition, the wellness champions from across Africa are trained and motivated to spread good practice in the bank’s operations and local communities.
Standard Bank believes long-term sustainability is also dependent on attracting and retaining talented employees. The group engages regularly through surveys and conversations with staff on issues of leadership, remuneration, challenging assignments, fair employment practices, career development and wellness and lifestyle support.
The bank has a leadership, development, coaching and mentoring department that trains leaders in support of the group’s strategic focus. Called the Global Leadership Centre, it aims to share and learn from best practices globally, sharpen the bank’s focus on being globally competitive, and explore opportunities to grow the business in developed and emerging markets. Standard Bank has other initiatives in place to encourage employees to engage in lifelong learning. It provides internal skills training programmes and offers bursaries to employees wanting to study further.
Standard Bank is compliant with the government’s goal of transforming society and it has programmes in place to increase the representation of black people, specifically black women and black women with disabilities. It helps employees maintain a healthy work-life balance by providing support initiatives which include healthcare and independent counselling and advisory services. These initiatives include wellness campaigns that give employees access to HIV/AIDS counselling and testing services, as well as an employee assistance programme that helps them deal with personal or work-related problems.
Standard Bank in 2009 became the first organisation to be awarded a special recognition award by the Employee Assistance Society of North America outside that continent. The award recognises excellence in organisations’ use of employee assistance programming and service delivery.
To ensure the sustainability of the group, it is critical that Standard Bank remains relevant to its stakeholders in its markets by managing both its financial and non-financial factors. It will continue to focus on further opportunities that will optimise its contribution to sustainable development in South Africa and the other countries in which it operates.
