Nedbank comes out on top in ESG rating
DURBAN - LENDER Nedbank came out tops against its peers in all three categories of the environmental, social and governance (ESG) in the 2019 SA Banking Sector ESG Disclosures Ranking.
The research was conducted across the six largest banks listed on the JSE that are Absa, Capitec, FirstRand, Nedbank, Rand Merchant Investment Holdings and Standard Bank.
ESG risk management company, Risk Insights, and ESG business communications firm, Instinctif Partners, released the South African Banking Sector ESG disclosure rankings for 2019 on yesterday.
Acting chief executive of Risk Insights and executive for ESG Anashrin Pillay said ESG had been an important narrative and many banks had implemented voluntary ESG reporting standards over the past four years.
“Our research shows that governance disclosure still makes up more than 80 percent of total disclosure on average for the banking sector in 2019. Social factors where brand, reputation and diversity play an important role, and environmental disclosure are both around 8 percent, respectively.”
The JSE Finance Sector constitutes 10 percent of the total market capitalisation of all JSE-listed companies, contributing 20 percent to gross domestic product and 15.6 percent to employment.
Findings for the report were derived from Risk Insights’ proprietary ESG GPS rating tool, which has been recognised by the World Economic Forum. The ESG GPS uses AI and machine learning algorithms to transform publicly available disclosure reporting, integrated reports and news flow into ratings for environmental, social and governance metrics.
In the Environment category, Nedbank scored the highest percentage score of 46.8 percent.
Standard Bank came in second place with a score of 19.8 percent, then Absa Group at 13.6 percent, FirstRand at 12.4 percent, RMB Holdings 7.0 percent and Capitec Bank Holdings closing the rankings at 0.3 percent. Capitec is a relative newcomer.
In this ranking, the banking players achieved an 8.2 percent average for environmental outcomes. This was interpreted to indicate that the industry had further opportunity to develop this aspect with regards to further actionable environmental commitments.
The report said while climate change was an ongoing conversation and some banks having recently made public statements about intentions not to finance conflicted or sensitive projects, such as fossil fuels, the reality was that to date, much of this was just talk and not yet a firm policy. This was said to be because of a number of challenges that ranged from impact on projects under way to board and executive conflicts of interest regarding investment priorities.
In the Social category Nedbank took first place for the social elements of the ESG ranking, making up more than 32.4 percent of the total sector score for this metric.
Absa came in second at 19.7 percent, with FirstRand a close third at 19.6. Standard Bank Group was at 18.2 percent, Capitec at 5.9 percent and RMB Holdings at 4.2 percent.
Commenting on the category, managing partner at Instinctif Partners Kim Polley said while many banks had social responsibility programmes, they were not often structured to integrate into sustainability frameworks, nor did they incorporate specific and measurable socio-economic targets.
She said addressing social inequalities and driving inclusive growth was critical to South Africa’s economic recovery post Covid-19 and banks sat at the intersection of commercial and individual financial opportunity, often serving as a gateway to economic success.
In the Governance category, Nedbank topped the board ahead of what the assessors described as its more established peers.
The bank scored 29.3 percent, then FirstRand 27.6 percent, Absa Group 18.3 percent, Standard Bank 14.3 percent, Capitec 6 percent and RMB Holdings at 4.5 percent.