The ‘green dimension’ of the Universal Standards for Social Performance Management (USSPM) focuses on identifying and managing environmental impacts and (climate) vulnerability. It is also meant to foster opportunities, and is therefore built in parallel with the updated version of the Green Index, through a collaborative effort of SPTF, CERISE and the e-MFP Green Inclusive and Climate Smart Finance Action Group (GICSF-AG).
The Standards under this ‘green dimension’ will reflect current best practices in the industry, and align with international consensus around sustainable and responsible finance. FSPs with social goals will go beyond the mainstream financial sector and address the reality in which their clients are facing the effects of climate variability, biodiversity loss, or energy poverty among other factors. The green finance standards will include defining an environmental strategy; evaluation of (climate) vulnerability and (environmental) impacts; development of products and services to improve client’s resilience and mitigate risks; enhance client productivity and return on investment; and, efforts to minimize the FSPs ecological footprint.
Jurgen HAMMER opened the session by introducing the theme and panellists. Talking about the 7th Dimension of Social Performance involves not just referring to the Climate Change Debate, but also comes forth from the demand of investors and service providers to get engaged in Green Finance as a business model. Hence a full dimension of SPTF’s universal standards was required, for which a working group was established, coordinated by Geert SCHUITE from The Palladium Group.
Davide FORCELLA, one of the Heads of the e-MFP GICSF-AG, then reflected on the process of developing the concepts with the Action Group, which was created in 2013 and currently counts some 90+ members, representing 50+ institutions with various levels of engagement.
One of the fundamental questions was to define ‘Green’, as it had become clear, by learning from the field, that a common standard was required. For this purpose, The GICSF-AG established the ‘Green Index 1.0’, which in 2016 was updated to the ‘Green Index 2.0’, composed of four core elements:
The Green Index 2.0 is not yet mainstream, and not yet institutionalised, but is already included in the SPI4 of CERISE, as optional dimension, and the first steps for a systematic approach have been made. The Green Index 3.0 and the ‘green dimension’ of the USSPM have the aim to institutionalise and mainstream environmental performance assessment and practices for an inclusive financial sector. The further development of both the Green Index 3.0 and the ‘green dimension’ of the USSPM has been founded on the analysis of 700+ environmental assessments from 2011 to 2019 by various stakeholders; extensive interviews and surveys among investors, FSPs and other stakeholders; review of main international initiatives in the sector; and, alignment of concepts and indicators. The team of GICSF-AG, SPTF and CERISE is now organising additional interviews and data collection with stakeholders, to complete a next proposal for the ‘Green Index 3.0’.
Already it was stated that one of the new aspects of the Green Index 3.0 will be the inclusion of assessing, managing and monitoring clients’ vulnerability in view of climate change. This is a key step because the aim is to put clients at the centre, and to define green inclusive finance not (only) as an ethical activity, but also (and mainly) as a key economic and social strategy and rational to reduce clients’ vulnerabilities, and to ensure socio-economic inclusion of poor households and micro/small enterprises.
Schuite subsequently explained where they had arrived in the process, and said to welcome feedback. He also invited participants to take part in a training session that the GICSF-AG had organised after this session.
The Green Index is aligning with current trends of green and responsible finance, as he referred back to last year’s EMW Award theme: ‘Strengthening resilience to climate change’. They are fully focused on developing the 7th Dimension as part of Social Performance indicators, related to inclusion, environmental risks, circular economy, and the carbon/ecological footprint.
In order to become a mainstream sector, more attention is also needed for client vulnerability, changing the order to put the client central. He therefore urges participants to give feedback on what the criteria should look like, and they will also go back to the stakeholders of the SPTF to evaluate results. Eventually, the Index should be flexible enough to take into account different circumstances.
Hammer concluded the session by referring to the need to standardise tools, in order to be able to compare and harmonise universal standards for the ‘green dimension’ in the context of social performance.