Memorandum submitted by Lloyds Banking
Group
1. INTRODUCTION
This paper sets out Lloyds Banking Group's approach
to managing environmental risks and opportunities throughout our
business operations. In it we describe our approach to managing
both our direct impacts on the environment, and the indirect impacts
we have through our business activities. We have a longstanding
commitment to proactively managing our environmental impact.
1.1 Highlights include:
— Lloyds TSB was one of the first banks
to introduce an Environmental Policy in 1996.
— Lloyds TSB reduced its energy use related
CO2 emissions by 31% between 2002 and 2008, four years ahead of
its target to reduce emissions by 30%.
— In 2007, Halifax and Bank of Scotland
launched a new climate change strategy, including purchasing renewable
energy for the entire UK estate and displaying energy performance
certificates on buildings.
— Truett Tate our Board member who leads
on climate change and sustainability externally and Paul Turner,
Head of Sustainable Development, are widely acknowledged as leading
voices in the industry on sustainability and climate change.
— In 2009 The Group collaborated with BITC
and the Cambridge Programme for Sustainability Leadership to produce
a guide for businesses on Carbon Management in the Supply Chain.
— We are a founding member of the UK Small
Business Consortium that helps small businesses take advantage
of opportunities in the new "green economy".
— Our asset management arm, Scottish Widows
Investment Partnership, offers specialist ethical, environmental
and socially responsible investment funds totalling £534
million.
— Lloyds Banking Group is one of the leading
financers of renewable energy globally and have supported enough
renewable energy generation to supply over 3 million homes.
— The Group is a signatory to the Equator
Principles, to manage social and environmental issues in project
financing.
— We are included in the FTSE4Good Ethical
Index, the Carbon Disclosure Project's Leadership Index, the Dow
Jones Sustainability Index and we are Platinum performers in Business
in the Community's Corporate Responsibility Index.
2. LLOYDS BANKING
GROUP
Lloyds Banking Group was formed on 19 January
2009 following the acquisition of HBOS by Lloyds TSB Group. Our
main business activities are retail, commercial and corporate
banking, general insurance, life assurance, pensions and investment
provision. Lloyds Banking Group is UK's largest retail bank. We
have over 30 million individual and corporate customers. We are
the UK's leading provider of mortgages, including first time buyer
and social housing finance, current accounts, savings, personal
loans and credit cards.
Our objective is to be recognised as the best
financial services company by customers, colleagues and shareholders.
We will do this by building deep lasting customer relationships
which help our customers achieve what is important to them. We
want to be recognised and recommended as a trusted brand by customers,
a good employer by colleagues and a valued contributor in the
community.
3. OUR CLIMATE
CHANGE STRATEGY
Climate change represents a huge global challenge
and one that will impact widely on business. We are committed
to grasping the opportunities that climate change presents and
managing the risks it poses. We proactively manage our direct
environmental impacts, as well as our indirect environmental impacts,
arising from our commercial activities.
3.1 Cost Reduction
We have a longstanding commitment to managing
our environmental impacts, having first introduced an Environmental
Policy in 1996. Our starting point is efficient use of resources.
Driving down our use of resources, including energy, paper and
water, helps keep our costs under control as well as being good
for the environment. Last year, we implemented an enhanced Environmental
Policy across the new Group. This year, our priority is to embed
an integrated environmental management system.
3.2 Colleague Engagement
One of our priorities is getting more of our
colleagues involved. Colleagues play a key role in delivering
our environmental agenda. They will be central to our success
in driving down carbon emissions across the estate. Driving colleague
advocacy of the Group's environmental agenda and increasing their
involvement is key to our success.
3.3 Customer Initiatives
Our business strategy is focused on deepening
relationships with customers, differentiating ourselves from the
competition by the quality of our products and services. We know
that climate change is an important issue to our customers. It
provides an opportunity to deepen relationships with customers.
As pressure grows on businesses to take action to combat climate
change, there is increasing demand for knowledge on climate change
issues from small and medium sized enterprises as well as corporate
customers. We provide advice to customers on how to manage risks
and maximise business opportunities around sustainability, and
build positive reputation.
3.4 Commercial Opportunities
There will be many commercial opportunities
as we all move to a low carbon economy. Renewable energy finance
is one such opportunity. Bank of Scotland and Lloyds TSB are already
among the leading financial players in renewables. The market
for renewable energy is set to grow significantly and we are seizing
the opportunity to become one of the UK's leading financers of
it.
4. LEADERSHIP
FROM THE
TOP
Our Corporate Responsibility Steering Group,
chaired by Group HR Director Angie Risley, comprises senior executives
from across the Group. All of our business divisions are represented
on the Steering Group, which reports to the Group Chief Executive
and the Board. The Steering Group meets regularly to agree and
direct corporate responsibility strategy, including environment.
Our Board reviews environmental performance as part of its review
of corporate responsibility at least annually. Where appropriate,
specific elements are reported more frequently.
Most of our corporate responsibility activity
takes place in the business divisions. Specific business divisions
have responsibility for elements of our environmental management
system. For example, Group Property has responsibility for energy
efficiency and Group Procurement for business travel.
Truett Tate, Group Executive Director, Wholesale
is the board member who leads on climate change and the environment
externally. He is a member of the Corporate Leaders Group on Climate
Change.
4.1 External Leadership On Climate Change
Lloyds Banking Group is represented by Group
Executive Director Truett Tate on the Prince of Wales's Corporate
Leaders Group on Climate Change. This group of leading businesses
released the "Copenhagen Communique", widely viewed
as the progressive voice of business, for the Copenhagen Climate
Change talks in December 2009. The Communique set out the business
case for an ambitious, robust, effective and equitable UN climate
framework. Over 950 companies from across the world signed the
communique which Truett Tate handed to the Prime Minister on behalf
of the Group just prior to the Copenhagen conference.
5. OUR DIRECT
IMPACT—LBG'S ESTATE
Our direct impacts on the environment arise
from our business operations. We are committed to managing and
reducing these impacts and have a strong track record.
Over 90% of our business operations are based
in the UK. Our carbon footprint is therefore primarily in the
UK. Our use of energy across our large UK estate—comprising
over 3,000 branches, call and data centres and other office buildings—is
the biggest contributor to our footprint. Reducing the amount
of energy we use in the first place is just as important as using
"greener" electricity. We have launched a range of initiatives
designed to reduce the amount of energy we use.
We have moved 5.1 million customers to online
statements. Not only does this save paper, but it also reduces
cost. We have also introduced low energy light bulbs across the
estate, reducing the energy consumption and cost of lighting.
Halifax and Bank of Scotland launched a climate
change strategy in 2007 for reducing carbon emissions and giving
customers clearer information on performance. This included buying
renewable energy for the entire UK estate. By the end of 2008,
Lloyds TSB had cut emissions by 31% on its 2002 figure, exceeding
its emissions reduction target four years ahead of schedule. More
recently, we have taken a step further by beginning to help customers
and suppliers manage their own environmental impact.
In 2009, we reviewed our Environmental Policy
to ensure it is fit for purpose across the whole of the Group.
Following this review we launched a new Environmental Policy and
we are currently working to integrate our heritage environmental
management systems to develop a harmonised groupwide approach.
This will help us to measure our impacts, and inform our policy
and objectives to reduce them.
In 2010 we will be subject to new climate change
regulation which will help us drive down our direct impacts further.
The UK Government is committed to reducing the country's carbon
emissions by 80% from 1990 levels by 2050. A central part of its
strategy is the introduction of a mandatory climate change and
energy savings scheme, the Carbon Reduction Commitment Energy
Efficiency Scheme. It starts in April 2010 and requires a collective
22% emissions reduction from participants. We will participate
fully in the scheme. We understand our obligations and are committed
to driving down CO2 emissions. We are developing a carbon management
policy and strategy to deliver a single approach for the new combined
Group. We continue to invest in carbon reduction projects across
the Group's estate.
5.1 Engaging Our Employees
Our challenge this year is to drive colleague
advocacy of our environmental agenda. Over the past year integration
communications have taken precedence; however a priority in 2010
is to deliver a comprehensive internal communications programme
on our environmental agenda to engage colleagues in our activities
and improvement plans.
We already have a strong starting point. Over
750 Lloyds Banking Group employees participate in our Sustainability
Network. It is also run entirely by members of staff. The goal
of the network is to provide a forum that can harness members'
commitment to improving environmental sustainability within the
organisation. The network holds events and runs awareness campaigns
to encourage colleagues to play their part. It tackles one theme
per quarter—in 2009 these were: paper, travel, energy and
waste.
The focus on travel reduction in 2009 helped
inspire colleagues to take steps to reduce their travel footprints.
We achieved a reduction of 143,000 journeys in 2009 compared with
2008. Across the combined Group, the volume of teleconferences
increased by over 40% to over 1.1 million. We will continue to
promote virtual conferencing technologies to colleagues as an
environmentally friendly, cost efficient alternative to travelling.
6. OUR INDIRECT
IMPACT: OUR
COMMERCIAL ACTIVITIES
6.1 Engaging Our Customers
There are many ways we can help our customers
as we all move to a low carbon economy; from traditional banking
products and service to using our expertise to open up market
opportunities, for example in renewable energy finance, where
both Bank of Scotland and Lloyds TSB are among the leading lenders.
Across the Group, green issues are helping us to win more business.
One source of real difference is in our relationships
with customers. Lloyds TSB Wholesale's Sustainability team has
put sustainability advice and guidance for relationship managers
online, providing a one-stop shop for information on market and
sector issues, regulation and policy. In addition, the team works
closely with relationship managers to provide information for
specific customers and sectors.
We are a founding member of the Small Business
Consortium. In 2008 we produced a resource to help small businesses
take advantage of opportunities in the new "green economy".
We launched it at the Prince of Wales's 2008 May Day Business
Summit on Climate Change, which we also sponsored. In 2010 we
are sponsoring the Prince of Wales's May Day Network on Climate
Change for the third year running.
With around 3,000 branches in the UK, our branch
staff play a key role in engaging customers in the shift to a
low carbon economy. Our Wholesale Division is launching a new
Sustainability Business Partner programme to establish a network
of colleagues in customer-facing roles to engage with customers
on risks and opportunities in a low carbon economy. By creating
a network of skilled partners, trained in the science, business
risks and opportunities of climate change, each area of the business
will have local capability to support their customers on these
issues.
6.2 Leading Through Procurement
We are demonstrating sustainability leadership
through our procurement of goods and services. Our procurement
policies and procedures include social, ethical and environmental
criteria which we expect our suppliers to meet, and colleagues
are encouraged to work in collaboration with suppliers to drive
continuous improvement. As a financial services company that does
not manufacture or sell "physical" goods, our supply
chain is not our most significant impact. However, we build environmental
issues into our procurement practices to help drive positive change,
reduce our exposure to risk and help control costs related to
environmental taxes, such as landfill and energy taxes.
In 2009, we launched a dedicated intranet site
across the Group which provides colleagues with information, guidance
and tools on incorporating social, environmental and ethical criteria
in all of our sourcing activities; in the selection of suppliers
and as part of supplier audits. This year, we are inviting around
200 of our top suppliers to become May Day companies by joining
the Prince of Wales's May Day Network on Climate Change.
In 2009 we chaired an initiative with Business
in the Community and the Cambridge Programme for Sustainability
Leadership to create a Guide for Carbon Management in the Supply
Chain. The guide has helped inform our approach and, as a freely
downloadable resource, we are also encouraging our suppliers and
customers to use it to help manage carbon risks in the supply
chain.
7. COMPANIES
IN WHICH
WE INVEST
Lloyds Banking Group's asset management arm,
Scottish Widows Investment Partnership (SWIP) is one of the largest
asset management companies in the UK. At the end of 2009, SWIP
managed £141 billion worth of funds in total. In addition
to specialist ethical, environmental and Socially Responsible
Investment (SRI) funds—totalling £534 million, as at
31 December 2009—consideration of a company's approach to
social, ethical and environmental issues forms part of the research
process for all funds. In the UK, SWIP manages £160 million
in environmental funds.
SWIP is a signatory of the Principles of Responsible
Investment, an investor initiative in partnership with the United
Nations Environment Programme Finance Initiative and the UN Global
Compact to help investors integrate consideration of environmental,
social and governance issues into investment decision-making and
ownership practices. SWIP is also a member of the Institutional
Investors Group on Climate Change.
SWIP has commissioned PwC to undertake a sustainability
audit of its operations and funds under management. The purpose
of this audit is to understand where SWIP currently stands on
managing sustainability issues within the business; to benchmark
SWIP against competitors and to undertake a gap analysis with
recommendations on how to improve SWIP's position with respect
to sustainability. The audit has been commissioned by the Executive
and its recommendations are likely to impact all areas of the
business. Outcomes of the sustainability audit are due in April
2010.
8. MANAGING ENVIRONMENTAL
RISK IN
LENDING
We aim to reduce environmental impacts of our
lending activities through effective risk management. In 2009
we implemented an enhanced Environmental Risk Policy across the
new Group which requires transactions to be assessed for material
risks as part of the credit sanctioning process.
This policy is supported by a robust process
which ensures that there is a consistent approach to the identification,
assessment, mitigation and reporting of material environmental
risk. Lending officers are responsible for ensuring that environmental
risk has been adequately assessed and that appropriate mitigating
action is taken if a material risk is identified. They are supported
by our in-house environmental risk team who review proposed transactions
and advise on methods to mitigate material environmental and reputational
risk exposure. Where appropriate, the team also seeks professional
input from external environmental consultants who work across
a range of sectors and global locations.
8.1 Training Colleagues On Environmental Risk
Management
We provide training for our lending managers
on environmental risk management. In 2009, 72 delegates attended
our three-day credit risk training course, which includes a module
on environmental risk management. This highly interactive module,
incorporating case studies and videos, examines how a customer's
activities may impact the environment, and the associated credit
risks. During the module, delegates are introduced to a range
of resources including the Group's Environmental Risk Handbook,
which provides in-depth information on assessing environmental
risk in lending transactions.
8.2 Equator Principles: Managing Social And
Environmental Issues In Project Finance
Lloyds Banking Group is a signatory to the Equator
Principles. The Equator Principles are voluntary guidelines for
the financial industry to manage social and environmental issues
in project financing. The principles apply to all new Project
Finance transactions above US$10 million.
During 2009 we implemented a harmonised groupwide
approach to monitoring and reporting Equator Principles transactions,
and training colleagues on the Equator Principles. An Equator
Principles Review Group, comprising experts from both Risk and
Project Finance teams, is responsible for reviewing all new Equator
Principle transactions, to ensure that each transaction is compliant
and is consistent with the Group Environmental Risk Policy.
All Equator Principles projects are reviewed
as part of an annual review process. In 2008, 25 Projects were
reviewed. Of these, 11 were completed with a total value of nearly
US$1 billion. Ten of the projects took place in Europe and the
US and one in the Middle East. The majority of these projects
were in renewables, energy and utilities.
9. RENEWABLE
ENERGY FINANCE
We have a very strong track record in supporting
the renewable energy sector. Lloyds Banking Group is a leading
renewables bank (by debt underwriting capability) globally. Over
the past five years we have arranged or underwritten finance for
40 deals, with £2.4 billion committed. This equates to over
6,000MW of renewable generation, which is enough to supply over
3 million homes. In 2009, we won the "Deal of the Year"
award for a UK offshore wind transaction.
Renewable energy finance is a key area for the
Group. Our current renewable portfolio stands at around £1
billion. Given our focus on the UK market, much of this finance
is directed towards wind power; however we also have strong experience
in the solar power sector.
10. CLIMATE CHANGE
RISKS IN
INSURANCE
Lloyds TSB and HBOS were launch signatories
to ClimateWise, a global initiative launched by the insurance
industry to enhance members' approach to climate change risks
in insurance. This approach has been continued in Lloyds Banking
Group.
11. ENGAGING
WITH INVESTORS
We have regular meetings with investors to discuss
our corporate responsibility strategy, including our environmental
strategy. Wherever possible, we conduct these meetings with our
Investor Relations team, to demonstrate the link between our business
strategy and our corporate responsibility agenda. Every year,
we provide investors with information on our greenhouse gas emissions
and climate change strategy through our participation in the Carbon
Disclosure Project, the world's largest database of corporate
climate change information. We are in their Carbon Disclosure
Leadership Index.
4 March 2010
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