Report (Part 5): Sustainable Development Convention 2002

Sustainable Development, an Opportunity for Economies & Societies

Time: 31 October 2002, 9:00 ? 10:00  Location: Salle A Chair: Mr. Peter Sissons Presenters/ Participants: Mr. Michael Hoelz, Deutsche Bank Reporter: Julie Archer and Makoto Fujiwara (ICVolunteers) Languages: English Key words: Sustainable development, shareholder value, microcredit, financing, credit, bank, international, business, Deutsche Bank

In this keynote speech by Mr. Michael Hoelz, the Global Head of Public Affairs and Sustainable Development at Deutsche Bank, delegates heard about sustainable development as the new paradigm in corporate management and learned about the sustainable investment activities of Deutsche Bank.

Mr. Hoelz opened by talking about shareholder value, saying that all significant value creation for companies in the next five to ten years will be linked to sustainable development: innovation, active networks, the ability to secure markets and develop new ones, and the potential to minimize risk. He talked about the ways in which ecological and social as well as economic issues are increasingly considered in business decision-making models and listed some of the measures of this in the financial world, such as the Dow Jones Sustainability Group Index, which is growing annually. Mr. Hoelz believes that it is the powerful force of financial markets that will continue to drive the growth of sustainable development in the business world. The challenge to business is that the market position of all corporations is increasingly determined by their competence in terms of sustainability. The areas for action are management competence, the company's core business area and the engagement of the business in sustainable livelihoods. 

Deutsche Bank has made a commitment to sustainability, said Mr. Hoelz, citing the fact that it has an environmental management system in place and has been ISO 14001-certified, it has adopted Total Quality Management standards, and it reports annually on its sustainable development performance following the standards set by the Global Reporting Initiative. Mr. Hoelz stressed that the principles of sustainability must be part of the management structure and processes, integrated into daily business activities, rather than being restricted to the work of a special committee or department. The bank has also put in place a series of new business investment criteria for financing and loans. These include social and environmental requirements in addition to the usual financial criteria. Clients must demonstrate environmental due diligence and the willingness to work in cooperation with governments, non-governmental organizations, international organizations and civil society, and show that sustainability issues have been addressed to the satisfaction of the bank's standards. Mr. Hoelz explained that including social and environmental criteria reduces risk to the bank because being involved in a high-profile environmental or social disaster could harm their reputation with serious consequences to shareholder value.

Surprising Issues
Mr. Hoelz made an interesting point in response to a delegate who asked how much the bank's credit analysts were able to verify the social and environmental practices of small and medium companies that applied for low-interest rate loans from the bank's microfinancing programme. Mr. Hoelz said that an important part of the programme was to work with partners in applicants' countries, using national expertise rather than opening Deutsche Bank subsidiaries in every country of operation or visiting the businesses of every client.

In the question period that followed the presentation, one delegate asked how deep the commitment to sustainable development goes at Deutsche Bank. Mr. Hoelz agreed that not every single member of the board or upper management would talk about sustainable development in the same way he does but that the bank has nonetheless made some very significant changes to its business for sound financial reasons. He noted that Deutsche Bank declined to refinance the oil pipeline project in Ecuador or to get involved in the Three Gorges Dam project in China because the bank's social criteria had not been met.

Another delegate asked how to persuade board members and large shareholders of the importance of sustainable development to shareholder value. Mr. Hoelz responded that it was crucial to provide a solid business case for any project. He also noted that since financing is a common factor in all business operations, banks had a powerful opportunity to make talking about sustainability a part of their regular dealings with business clients.

Conclusions
Mr. Hoelz concluded that it is the responsibility of all those working in sustainable development, whether through the private sector or non-governmental organization, to work more with the "unconverted" rather than always talking about sustainability with those who already see its value. He said that for the business world, sustainability has clear value in terms of risk-reduction, business innovation and market expansion, and that it should not be presented as simply a desirable ethical option. He also reminded delegates of the power of the market in swaying the minds of those in business and, ultimately, government. Mr. Hoelz closed by saying that we are on the right track and that in his mind, the glass is half-full, not half-empty, an expression which delegates quoted throughout the rest of the day when discussing his presentation.