Case study: How BN Bank works with its clients and customers to encourage sustainable practices

Stakeholder identification and consultation

Please describe which stakeholders (or groups/ types of stakeholders) you have identified, consulted, engaged, collaborated or partnered with for the purpose of implementing the Principles and improving your bank’s impacts. This should include a high-level overview of how your bank has identified relevant stakeholders, what issues were addressed/results achieved and how they fed into the action planning process.

Engaging in active dialogue with BN Bank’s key stakeholders is an important tool for achieving the objectives outlined in its Sustainability Strategy. Through an analysis of its interactions with significant stakeholders, BN Bank has identified the Sustainable Development Goals (SDGs) where it believes it can make the most substantial impact. Consequently, maintaining open communication with customers and other stakeholders will be vital for the bank as it works to meet its targets.

Customers and their activities form the bedrock of BN Bank’s business, and addressing their needs is essential for the bank’s success. The dialogue with customers occurs through various channels, including customer surveys, meetings, the bank’s website, and marketing materials.

Overall, BN Bank has received very positive feedback from its customers, indicating a high level of satisfaction. Ongoing dialogue with customers is essential for monitoring trends and developments in the market. Property developers represent a significant subgroup of BN Bank’s clientele, particularly in the project and property development sector. The bank possesses considerable expertise in this area and is knowledgeable about responsible actors who demonstrate good business ethics. BN Bank aims to provide products and services that cater to the comprehensive financial service needs of its customers while ensuring that they do not face difficulties meeting their obligations. Therefore, clearly defined serviceability requirements are essential when granting loans. There is an anticipated trend where an increasing number of customers will prioritize the bank’s sustainability profile, expecting it to provide sound advice and financing options for environmental initiatives, such as upgrading residential and commercial properties to comply with future environmental standards. Customers also expect protection against fraud, safeguarding of their privacy, and accurate, reliable information regarding the bank’s products and services.

Ongoing dialogue with customers is crucial for staying current with market trends and needs, allowing the bank to continue offering the services that clients require. BN Bank operates lending and deposit activities across two distinct business areas: the personal market (nationally) and the business market (central eastern region). In both segments, the bank delivers efficient, predictable, and solution-oriented banking services, ensuring excellent customer service. BN Bank incorporates ESG factors into its customer and credit assessments.

The bank’s employees are a vital asset. BN Bank actively strives to be an attractive employer to attract and retain talented personnel. Employee dialogue occurs through regular departmental meetings, general meetings, discussions with union representatives, formalized meetings between employees and their immediate supervisors on a regular basis, and employee surveys.

The primary concerns regarding employees include:

• Ensuring the bank does not discriminate based on gender, orientation, ethnicity, or identity.
• Providing employees with opportunities to learn necessary tasks and have rewarding, fulfilling workdays.
• Maintaining a positive physical and psychosocial work environment.
• Ensuring safe working conditions and a healthy work-life balance.
• Fostering good relations with the union and providing fair wages.
• Promoting a healthy work environment both physically, mentally, and socially.
• Encouraging all employees to participate in meetings with their managers.

All employees are covered by a collective agreement, and by the end of 2022, 73% were unionized. The bank enjoys strong cooperation with the trade union, practices flexible working hours, and offers the option for remote work. Additionally, employees can take half-days for caregiving purposes.

Owners
BN Bank is owned by a consortium of banks within the Sparebank1 alliance. The owners are knowledgeable and professional entities familiar with the market conditions and regulatory requirements facing BN Bank. They set clear expectations for growth, profitability, value development, and sustainability efforts. BN Bank’s communication with its owners occurs through periodic reports, board meetings, participation in joint forums, and other forms of contact.

To meet its owners’ demands for growth and returns over time, BN Bank must increasingly demonstrate a commitment to sustainability and sustainable finance. This includes, among other things, effective controls against money laundering and terrorist financing, as well as responsible environmentally-friendly investments. Comprehensive reporting is pivotal to maintaining strong communication between the bank and its owners. Additionally, BN Bank prepares climate accounts to assess its emissions footprint and has implemented measures to meet its emission reduction targets. 

Investors
The Norwegian bond market serves as a critical source of capital for BN Bank. The bank must continuously provide the capital markets with relevant information and insights regarding its operations. High expectations for reporting enhance business management practices. BN Bank engages with investors through face-to-face meetings, interactions with brokers and analysts, and official financial reporting and presentations.

Investors increasingly expect BN Bank to act sustainably with a focus on sustainable finance, particularly in efforts to reduce greenhouse gas emissions within its lending portfolio. Effective reporting is essential to ensure that information flows smoothly between the bank and its bondholders.

BN Bank prepares sustainability reports that align with the expectations for a financial institution of its size and complexity. These reports include a climate account that measures the bank’s direct and indirect environmental impact according to international standards. The bank has established a framework for issuing green bonds, with its first issuance occurring in 2022.

Supervisory Authorities
The supervisory authorities manage regulations that form essential framework conditions for the bank’s operations. BN Bank’s interactions with these authorities involve circulars and other written information, regular reporting, meetings, and occasional ad hoc communication.

Regulatory requirements, regardless of the organization’s size, generally impose the same obligations on small banks as they do on larger ones. BN Bank must comply with regulations and maintain robust risk management practices, which include compliance with the AHV regulations and integrating ESG factors into credit assessments and management of credit risk.

How did BN Bank work with its clients and customers to encourage sustainable practices and enable sustainable economic activities?

In its 2023 PRB Reporting and Self-Assessment Template BN Bank reports that it works with its clients and customers to encourage sustainable practices and enable sustainable economic activities as follows:

Policies and practices at BN Bank encompass written documents and educational initiatives related to:

Engagement with and assessment of customers through Credit Policies. These policies are utilized daily and outline the framework and principles governing the bank’s credit activities, including ESG considerations. Every new employee involved in credit assessment and customer relations undergoes comprehensive training in these policies. BN Bank’s credit policies are designed to encourage borrowers to prioritize environmental, social, and governance issues. During discussions with borrowers, the bank communicates specific requirements and expectations related to ESG, which are evaluated in the credit assessment process.

BN Bank has also implemented assessment tools to evaluate the ESG profiles of its corporate customers, which play a crucial role in dialogues with this segment. The bank has observed a significant increase in customer awareness regarding ESG topics, particularly as they seek relevant measures to mitigate climate risks associated with their properties.

BN Bank is currently in the process of establishing stricter policies concerning loan-to-value ratios based on the climate risks of the buildings being financed. These restrictions will be part of the discussions with customers, as they may necessitate additional equity for financing to be granted.

All employees are required to update their knowledge of the Standards of Ethics on an annual basis.

Moreover, all employees receive training on requirements and procedures related to Asset Liability Management (ALM) and counterterrorism financing. In line with responsible lending practices, BN Bank has ceased its own unsecured lending operations. The bank also advocates for regulations that better protect consumers by actively engaging with the media. BN Bank and its directors have received multiple awards and commendations from consumer protection organizations.

The bank has established a “Green Bond Framework,” with its first issuance of green bonds occurring in Q4 2022. This framework includes financing for the refurbishment of both commercial buildings and residential properties. BN Bank aims to develop products that encourage borrowers to enhance energy efficiency and plans to introduce a green deposit product. Additionally, the bank is collaborating with the Norwegian tax authorities on the “Tettpå” campaign, which aims to combat crime within the building industry.

UN Principles for Responsible Banking: Accelerating a positive global transition for people and the planet

With over 300 signatory banks representing almost half of the global banking industry, the Principles for Responsible Banking are the world’s foremost sustainable banking framework. Through these Principles, the banking community takes action to align core strategies, decision-making, lending and investment with the UN Sustainable Development Goals and international agreements such as the Paris Climate Agreement.

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References:

This case study is based on published information by BN Bank, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:

https://www.bnbank.no/globalassets/02_om-oss/gronn-bank/barekraftsbibliotek/prb-reporting-and-self-assessment-template-2023.pdf

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