Case study: How the MPS Group 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.

The Bank has always regarded stakeholder engagement as essential. In 2022, in response to the evolving definition of sustainability and the increasing interest from various stakeholders, the MPS Group updated and expanded its stakeholder list. This list is regularly monitored, revised, and engaged in various ways and frequencies. Specifically, the MPS Group’s stakeholders include customers, shareholders, employees, institutions, trade associations, academic representatives, suppliers, analysts, investors, and media representatives.

In 2022, in line with new GRI requirements, the MPS Group conducted activities to directly engage qualified representatives of these stakeholders and sustainability thought leaders through individual interviews and focus groups.

These interviews enabled the MPS Group to explore the latest industry trends, understand ESG expectations, evaluate the material impacts of the Group’s activities, and gather insights on sustainability risks and opportunities specifically related to financial institutions and the MPS Group.

The findings from these interviews were presented to the Top Corporate Bodies and considered in the formulation and refinement of the Group’s ESG strategies and objectives.

The Group persistently engages with its stakeholders through various channels and at different frequencies.

How did the MPS Group work with its clients and customers to encourage sustainable practices and enable sustainable economic activities?

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

The MPS Group has initiated a dialogue with its customers and communities through its vast network of branches, which allows it to understand customer needs and develop targeted products to support the local economy.

Banca MPS has created its own “Group Sustainability and ESG Directive,” outlining the organizational framework that the Monte dei Paschi di Siena Group follows to implement its commitments, models, and codes of conduct. This directive is aligned with the Code of Ethics, external regulations, and both Italian and international guidelines, as well as the standards and initiatives the Group has voluntarily adopted in the area of sustainability and ESG.

As a result, the MPS Group has established policies and processes that incorporate ESG factors and aim to encourage sustainable practices among its customers. The ESG Directive delineates roles and responsibilities for managing client relationships and identifying emerging ESG needs. Additionally, it introduces ESG lending guidelines and criteria for phase-out in sectors with significant environmental impacts. The directive outlines actions, lending strategies, and ESG commercial offerings aimed at promoting the transition to sustainable and green practices.

Furthermore, General Screening Criteria have been integrated into the credit processes and standards, applicable to all counterparties and projects, to evaluate their adherence to minimum sustainability standards that the Group deems essential, as outlined in the Code of Ethics and consistent with international, European, and national conventions (ILO). In 2023, the ESG questionnaire for corporate customers was updated, serving as a key tool for assessing the ESG profile of clients.

Through this Directive, the Group also seeks to foster a culture of sustainability and enhance awareness of the potential impacts these factors can have on its operational processes.

In the realm of ‘Sustainable Finance,’ the MPS Group is dedicated to aligning with the latest developments in sustainable finance to lessen the indirect environmental impacts associated with its financial activities. This involves considering the sustainability profiles of customers, investors, and business partners in its financial decision-making. The Group specifically supports the transition of companies to sustainable models through high-value environmental and social products and services, along with the gradual introduction of ESG products into its offerings.

In this regard, the MPS Group commits to refraining from providing financing to counterparties and projects that, during the assessment phase, are found to negatively impact:

• World Heritage Sites (UNESCO)
• Wetlands as defined by the Ramsar Convention
• Protected or sensitive areas crucial for biodiversity conservation (IUCN Category I-VI areas)

Additionally, the Group will not finance companies and projects if, during the due diligence process, there is evidence of legal issues related to:

• Violations of human rights and health and safety regulations
• Violations of fundamental labour rights, including child labour and forced labour
• Fraud in financial and non-financial reporting, money laundering, corruption, or the financing of terrorism

Alongside the progressive definition of decarbonization targets, the Group has established phase-out and/or specific due diligence criteria for high-environmental-impact sectors: “Coal Mining,” “Power Generation, Marketing and Distribution,” and “Oil and Gas.” Specifically, there is a plan to phase out financing for companies and projects operating in the following areas:

• Coal mining
• Marketing and distribution of electricity if companies intend to construct new coal-fired power plants, derive over 30% of their energy from coal, and lack transition plans to achieve 40% renewable energy production by 2030
• Oil and gas extraction if they plan to develop or expand unconventional oil and gas exploration and production (such as fracking and tar sands) or derive more than 20% of their revenues from activities related to unconventional oil and gas extraction and transport, and if they plan to explore for or construct new oil fields and related infrastructure.

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 the MPS Group, 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.gruppomps.it/static/upload/prb/prb-2023-en-con-attestazione.pdf

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