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Banking Environment Initiative (BEI)

Banking Environment Initiative (BEI)

2 September 2014: BEI Forum 2014 Conference Report published

BEI Forum 2014 report

Barclays Chief Executive Antony Jenkins led a group of representatives of global banks meeting in Hong Kong on June 24, 2014 to explore ways that banks can work with companies to promote sustainable means of production, starting with agricultural commodities.

The Forum laid the groundwork for the Banking Environment Initiative (BEI) to broaden its remit by including more financial institutions and companies in its working groups, and intensifying its engagement in Asia.

Members committed to build on the BEI’s alliance with commodities and consumer goods companies to combat deforestation, and to push ahead with a programme to foster sustainable trade in agricultural commodities via such financial solutions as BEI’s recently introduced Sustainable Sustainable Shipment Letter of Credit.

Download the report (pdf).

8 July 2014: The 'Soft Commodities' Compact between the CGF and BEI continues to build momentum

The current group of eight adopting banks comprises BEI members Barclays, Deutsche Bank, Lloyds Banking Group, Santander and Westpac as well as BNP Paribas, RBS and UBS, who are not BEI members.

Read more information about the 'Soft Commodities' Compact.

The BEI Forum 2014 took place on 24 June 2014 in Hong Kong

Over 100 representatives of banks, consumer goods companies, agricultural producers and NGOs attended the BEI Forum 2014 in Hong Kong. The event was opened by Antony Jenkins, CEO of Barclays. He was followed by more than 20 speakers in keynotes and panels. The debate extended to the audience, who were actively involved in discussing progress on the BEI's Soft Commodities Compact, developed in co-operation with The Consumer Goods Forum. After the event, delegates mingled at an evening reception, held at The Upper House and sponsored by Barclays, which was also headline sponsor for the event, with Northern Trust, Westpac and Wilmar also sponsoring.

Asia Perspectives Panel: Why sustainability matters in Asia and what banks can do to help

BEI Forum 2014, Asia Perspectives panel: Jeremy Wilson (pictured left) Vice Chairman, Corporate Banking, Barclays, and chair of the BEI working group, Namita Vikas, Senior President & Country Head - Responsible Banking / Chief Sustainability Officer, YES Bank Ltd, Andreas Schaffer, Sustainability Director, Earth Observatory of Singapore, Nanyang Technological University

From left: Jeremy Wilson, Vice Chairman, Corporate Banking, Barclays, and Chair of the BEI Working Group; Namita Vikas, Senior President & Country Head – Responsible Banking / Chief Sustainability Officer, YES Bank Ltd; Andreas Schaffer, Sustainability Director, Earth Observatory of Singapore, Nanyang Technological University

Asian economies must tackle the twin challenges of encouraging growth while preserving the environment. This keynote address looked at how Asia’s banks and corporates are rising to the task and asks what the future holds for the region.

Investor Perspectives Panel: Sustainability risks and opportunities in corporate value chains in Asia

BEI Forum 2014 Investor Panel: Alexandra Tracy,  President, Hoi Ping Ventures and Chairman, Association for Sustainable and Responsible Investment in Asia (moderator), Emily Chew, Senior Analyst & Asia-Pac Regional Lead, ESG Research, MSCI Inc, Bo Kratz, Managing Director, Head of Asia Pacific, Northern Trust Asset Management, Ronnie Lim, Senior Investment Specialist from Robeco Hong Kong

Alexandra Tracy, President, Hoi Ping Ventures and Chairman, Association for Sustainable and Responsible Investment in Asia (moderator); Emily Chew, Senior Analyst & Asia-Pac Regional Lead, ESG Research, MSCI Inc.; Bo Kratz, Managing Director, Head of Asia Pacific, Northern Trust Asset Management; Ronnie Lim, Senior Investment Specialist from Robeco Hong Kong

This panel discussion asked what priorities mainstream investors see for change in corporate value chains to tackle the twin challenges of encouraging growth while improving environmental and social outcomes.

June 24: Banking Environment Initiative Forum, Hong Kong

Read the press release: Global banks collaborate with consumer goods companies to promote sustainable production of agricultural commodities at Banking Environment Initiative Forum.

29 April 2014: A financing solution to incentivise sustainable commodity trade

Following the launch of the BEI’s Sustainable Shipment Letter of Credit (LC) at the World Economic Forum in Davos in January 2014, the BEI has partnered with the International Finance Corporation (IFC) to enable preferential treatment for trade in agricultural goods that meet internationally-recognised sustainability standards.

Commodities guaranteed under the Global Trade Finance Program (GTFP) and shipped with a Sustainable Shipment LC and relevant accredited stamp will enable banks financing this trade to qualify for a preferential rate. This expectation is that banks will pass these incentives on to customers. RSPO (Roundtable on Sustainable Palm Oil) certified Palm oil is the first commodity to be made eligible for the programme, with more expected to follow.

Read about this partnership on the IFC website. 

Read more about the Sustainable Shipment Letter of Credit.

Read more about the IFC Global Trade Finance Program.

2 April 2014: The BEI-CGF Soft Commodities Compact is released

The BEI-CGF Soft Commodities Compact

The ‘Soft Commodities’ Compact, a unique, client-led initiative that aims to mobilise the banking industry as a whole to contribute to transforming soft commodity supply chains – and therefore help clients achieve zero net deforestation by 2020 – is now available.

Read about this work and download the Compact.

The BEI Forum 2014 is coming to Hong Kong on 24 June

The Forum will gather together banks, producers and corporations who are leading the way in directing capital towards sustainable commodity supply chains. A mix of keynote sessions, real-world case studies and interactive panels will leave participants better equipped to succeed in a world where sustainability is becoming the key driver for global policy and trade.

Read more about the Forum.

25 January 2014: The Banking Environment Initiative’s Sustainable Shipment Letter of Credit

As Chief Executives of international banks and consumer goods companies met at the World Economic Forum’s Annual Meeting in Davos to discuss priorities for the financing of sustainable agricultural commodity supply chains, CISL published a paper which details a financing solution to incentivise sustainable commodity trade.

Read more about this work and download the paper.

24 January 2014: University of Cambridge research investigates bank regulation

A new research project as been established to investigate whether financial sector regulation in its current form could actually be increasing financial sector risk by failing to take adequate account of both positive and negative environmental externalities that affect financial stability.

The research is being led by the Universities of Cambridge and Zurich is being supported through a partnership between the BEI and the UNEP Finance Initiative. Bloomberg is providing additional support.

The research project will form part of a session at the BEI Forum 2014.

4 December 2013, The White House: BEI joins consumer goods giants to brief Obama Administration on incentivising sustainable agricultural commodity production

The White House

Represented by Jeremy Wilson, Vice Chairman of Corporate Banking at Barclays and Chair of the BEI’s Working Group, the BEI joined Chief Executives of Consumer Goods Forum companies Unilever, Nestlé, Coca-Cola, Royal Ahold & Co, SC Johnson, Walmart and Cargill to brief the Obama Administration on how BEI banks and CGF companies are working together to drive deforestation out of supply chains.

As part of the Tropical Forests Alliance, the US Government is committed to supporting private sector action to halt deforestation. The Administration therefore valued hearing about the group’s emergent thinking on how to incentivise trade of sustainably produced agricultural commodities via Sustainable Shipment Letters of Credit. The CGF-BEI partnership, convened by CISL, agreed to continue to engage with the US and other governments on this agenda.

September 2013: presenting a model for incentivising the trade of sustainably produced commodities

International banks and CPSL present model for incentivising the trade of sustainably produced commodities at Asia’s largest trade finance conference in Singapore

Andrew Voysey, CPSL Development Director – Finance Sector, presenting the model at the conference

The organisers of GTR’s Asia Trade Finance Week – the largest trade finance conference for companies, trading houses, banks and insurers in Asia – asked CISL and the banks of the Banking Environment Initiative to present the concept we have been developing for a ‘Sustainable Shipment’ model that would offer financial incentives for the trade of sustainably produced commodities, including agricultural commodities like palm oil, soy, timber products and beef. After the model was presented by CISL’s Andrew Voysey, the conference in Singapore heard perspectives from Heads of Trade Finance at Barclays, Westpac and the International Finance Corporation as well as Unilever’s Procurement Operations Director for Sustainable Sourcing of Tropical Materials. The concept was well received by a knowledgeable audience.

For more information, please contact andrew.voysey@cisl.cam.ac.uk.

BEI Forum

The BEI has decided to postpone its next Forum until early next year.

The BEI member banks want to be sure that the Forum is attended by the very highest levels of leadership and a date early in 2014 will allow us to achieve this based on relationships with the banking and corporate sectors, regulators and governments that have been developing through our work on the Forum to-date.

We remain committed to running the event in China, working closely with regional partners, and feel that this is a great opportunity to develop the work of the BEI in the Asia Pacific region.

April 2013: BEI ‘Sustainable Shipment Letter of Credit’ concept warmly received by BAFT-IFSA and ICC Banking Commission

Daniel Schmand, Advisory Board Member, ICC Banking Commission Head of Trade Finance & Cash Management Corporates EMEA, Deutsche Bank and Sabrina Borlini, Global Manager, Business Development, Global Trade & Supply Chain Solutions, International Finance Corporation

Daniel Schmand, Advisory Board Member, ICC Banking Commission Head of Trade Finance & Cash Management Corporates EMEA, Deutsche Bank and Sabrina Borlini, Global Manager, Business Development, Global Trade & Supply Chain Solutions, International Finance Corporation

The BEI’s inaugural Forum in London in November 2012 inspired an idea for integrating commodity-specific sustainability standards into the documentary trade finance process. This could prove to be a key enabler in the emergence of verifiably sustainable commodities on traded markets.

The BEI has nurtured the idea since then, working with commodity buyers, trading houses, major trade finance banks and multi-lateral development banks to develop a specific proposal.

In the last three months, BEI banks have been hosted at a number of influential trade finance summits to test industry interest in the proposal. These have included:

  • BAFT-IFSA Asia Council (Hong Kong, March 2013)
  • BAFT-IFSA Europe Council (Zurich, March 2013)
  • ICC Banking Commission Biannual Summit (Lisbon, April 2013)
  • BAFT-IFSA Global Annual Meeting – The Americas (Florida, May 2013)

At every stage, the BEI has been encouraged to develop the concept further and BAFT-IFSA and the ICC Banking Commission and have both committed to supporting this process. In addition, at the ICC Banking Commission meeting in Lisbon in April 2013, the IFC announced that it is prepared to support the initiative by giving preferential treatment to sustainable LC business with its partner banks through its flagship programme, the ‘Global Trade Finance Program’. This would be similar to the benefits that IFC extends through its ‘Climate Smart Trade' initiative, which targets trade that has clearly defined climate change benefits.

The BEI will now be taking forward the next step of the development of this concept by convening a ‘deep dive’ process to explore and agree how the BEI’s ‘Sustainable Shipment Letter of Credit’ would work in practice with one case-study commodity . It is hoped that this will serve as a blueprint for other commodities.

April 2013: BEI explores ‘Fossil Fuel Diversification Premium’ to advance clean energy investment in New York

At a private dinner at The Harvard Club in New York City on 22 April 2013, the BEI and Bloomberg New Energy Finance convened executives from major US, European and Chinese electric utilities with senior energy bankers to advance its collaboration on clean energy investment.

At the heart of the conversation was whether the portfolio value of clean energy power generation is being sufficiently reflected by the capital markets, given the policy and market uncertainty that utilities face.

The IEA’s Chief Economist, Fatih Birol, has said “the future of energy has never been so uncertain”. It is not surprising that navigating regulatory and market uncertainties is one of the top challenges for power companies; Boards must commit capital today to keep the lights on for the decades over which generation assets need to perform. Yet they also know that future operating environments will be very different. Capital allocation decisions that assume a relatively static operating environment will clearly not prove to be resilient, let alone outperform; failing to plan for change would be to misread the reality of the transition.

The group therefore discussed:

1. What factors contribute to creating a 'Fossil Fuel Diversification Premium'?
2. How would such a premium translate into the capital markets?
3. What can the BEI and this group uniquely contribute to developing this thinking?

The group agreed that there was merit in this unique coalition developing this thinking further to see whether it is possible to demonstrate the combination of factors and scenarios in which a 'Fossil Fuel Diversification Premium' would have impact, and to whom in particular, in the capital markets.

Jeremy Wilson, Chair of the BEI’s Working Group, was then invited to address Bloomberg New Energy Finance’s Annual Summit on the topic the next day. 

November 2012: BEI Forum

BEI Forum 2012 Soft Commodities Panel

BEI Forum 2012, Soft Commodities Panel: James Stacey, Senior Associate CPSL ; Sabine Miltner, Managing Director and Group Sustainability Officer, Deutsche Bank; Rogier Schulpen, Global Head of Structured Trade and Commodity Finance, Grupo Santander; Gavin Neath, CBE, Unilever

The first results of these innovative bank–corporate partnerships for sustainability were shared at the inaugural BEI Forum in London in November 2012.

More than 120 people attended, including the senior leadership of BEI banks and representatives of other banks from as far afield as China and the US. They were joined by the leaders of Consumer Goods Forum (CGF) companies and energy firms that are working with the BEI, such as Tom Albanese of Rio Tinto and Paul Polman of Unilever, as well as thought leaders such as WWF’s Jason Clay. Browse the tabs on this BEI page to find video excerpts from the Forum.

BEI Forum Official Report

Read the official report of the BEI Forum 2012 online (requires Adobe Flash Player).

Download the report as a pdf.

Unlocking Investment in Clean Energy

One output launched at the Forum was a paper published by the BEI with six global energy companies. An Options Approach to Unlocking Investment in Clean Energy argues that using traditional investment valuation models is not always the best approach for valuing clean energy investments. The paper concludes that when uncertain future market or policy conditions would have unequal impacts on investment performance, valuation models that explicitly value the fact that clean energy investments give energy companies the option to adapt to changing market or policy conditions may be more appropriate.

"This report makes a valuable and timely contribution to understanding the complex investment decisions faced by energy companies, and should be considered by company boards, investors, credit rating agencies and policymakers alike. We believe the real options approach warrants a more prominent role in valuation analysis, and is particularly useful when extended from single assets to diversified portfolios."
Alan Brown, Managing Director, Co-Head Global Natural Resources Group at Deutsche Bank

The BEI will now be working with energy companies and other key influencers in the capital markets to ensure that this approach is widely understood and embedded into investment decision-making.

Aligning with Consumer Goods Companies on Soft Commodities

At the Forum, delegates heard from Unilever and Procter & Gamble as to why the membership of the Consumer Goods Forum is so focused on using its combined procurement power of over $3 trillion to transform soft commodity value chains that currently contribute the most to deforestation.

Experts representing a range of perspectives from across BEI banks, including Global Head of Structured Trade and Commodity Finance, Head of Trade Finance for Asia and Managing Director and Group Sustainability Officer, then explained why they have been collaborating with CGF companies through the BEI to establish how the banking industry can align itself with this powerful market trend.

BEI Forum participants gave strong endorsement for the BEI progressing both of these areas of focus, while adding a further area of enquiry into how the provision of trade finance specifically can be aligned with the BEI–Consumer Goods Forum collaboration, deepening the participation of banks in emerging markets and ensuring policymakers are well informed about the BEI’s activities.

London skyscrapers

The Chief Executives of some of the world’s largest banks created the Banking Environment Initiative (BEI) in 2010. Its mission is to lead the banking industry in collectively directing capital towards environmentally and socially sustainable economic development.

The group comprises 10 banks from Asia to Europe and the Americas: Barclays, BNY Mellon, China Construction Bank, Deutsche Bank, Lloyds Banking Group, Nomura, Northern Trust, Santander, Sumitomo Mitsui and Westpac. Antony Jenkins chairs the BEI’s Chief Executive Panel. Jeremy Wilson (Vice Chairman, Corporate Banking, Barclays) chairs the Working Group.

The BEI is convened by the University of Cambridge Institute for Sustainability Leadership (CISL), which provides the BEI’s Secretariat.

How does the BEI work?

At the heart of the group’s vision lies a simple thesis: banks work for their clients and an initiative like this will only work if it is aligned with their interests and vice versa.

The BEI achieves its mission by focusing on topics where industry-wide action is needed, working in partnership with its customer base by bringing independent thinking to bear on the issues and through the active leadership of its Chief Executives.

Core to the BEI’s work programme are unique workstreams with groups of corporates to identify how banks can better support their needs on key sustainability topics:

The BEI-CGF Soft Commodities Compact: An alliance with the consumer goods industry to finance sustainable commodity supply chains.

Read more about this work.

‘Sustainable Shipment’ Letter of Credit: A collaboration to allow banks to incentivise sustainable commodity trade.

Read more about this work.

The BEI Forum: The BEI’s second Forum event will gather 100 invited senior bank and corporate representatives in Hong Kong on 24 June 2014 to develop the BEI’s work from the perspective of one of Asia’s leading trading hub.

Read more about the Forum.

Financial Sector Regulation: The BEI has commissioned research in partnership with UNEP FI and Bloomberg to investigate whether regulation could be increasing risk in the sector by not taking into account the links between natural resource constraints and the financial stability objectives of Basel III.

Clean Energy: A partnership with electric utilities to unlock investment in clean energy.

Read more about this work.

The Banking Environment Initiative (BEI) & Consumer Goods Forum (CGF)’s ‘Soft Commodities’ Compact

The ‘Soft Commodities’ Compact is a unique, client-led initiative that aims to mobilise the banking industry as a whole to help transform soft commodity supply chains, thereby helping clients to achieve zero net deforestation by 2020.

In 2010, the Consumer Goods Forum (CGF) Board of Directors committed their 400 members, representing a combined procurement power of over $3 trillion, to achieving zero net deforestation in their supply chains by 2020. The ‘Soft Commodities’ Compact is the result of two years of extensive collaboration between the Banking Environment Initiative (BEI) and the CGF, with advice from the World Wildlife Fund (WWF), to establish how to align the banking industry with this goal.

Download the Compact.

The Compact was endorsed by the CGF Board in December 2013, welcomed by the Obama Administration at a White House meeting shortly after, and used to exemplify powerful industry-to-industry partnerships at a special session of the World Economic Forum’s Annual Meeting in Davos in January 2014.

Adopting banks

The ‘Soft Commodities’ Compact between the CGF and BEI continues to build momentum. The current group of five adopting BEI member banks comprises Barclays, Deutsche Bank, Lloyds Banking Group, Santander and Westpac.

BarclaysDeutsche BankLloyds Banking Group
SantanderWestpac



In addition, various non-member banks have also adopted the Soft Commodities compact:

BNP ParibasRBSUBS

The CGF has issued communications to its global membership on this development and various other stakeholders have made their own networks aware too, such as the RTRS and PEFC.

The ‘Soft Commodities’ Compact includes two commitments:

  • Banks will work with consumer goods companies and their supply chains to develop appropriate financing solutions that support the growth of markets producing palm oil, timber products, soy or beef without contributing to deforestation.

  • Banks, where needed, will raise the standards they expect of certain clients in high-risk geographies so that they are encouraged to improve their sustainability performance in line with CGF expectations through to 2020.

 

There are three reasons why banks should adopt the ‘Soft Commodities’ Compact:

1. Drive market transformation by connecting risk management practices with client approaches.

2. Develop financing solutions at a scale that offers material commercial rewards.

3. Enhance client relationships by catalysing a truly industry-wide approach

Find out more

To find out more about the background to the ‘Soft Commodities’ Compact and how to get involved, download this briefing.

Download the Compact.

Download the 'Soft Commodities' Compact Q&As.

Sustainable Shipment Letter of Credit: A financing solution to incentivise sustainable commodity trade

The first tangible result of the ‘Soft Commodities’ Compact has been produced – the BEI’s Sustainable Shipment Letter of Credit is a financing solution that can be used by banks to incentivise the international trade of sustainably produced commodities. The International Finance Corporation (IFC) has confirmed it will offer preferential terms for this type of shipment to its partner banks, offering the potential reductions in the cost of capital.

The Chief Executives of the world’s biggest buyers of agricultural commodities, through the Consumer Goods Forum, have made public commitments to transforming supply chain practices. By 2020, their palm oil, soy, pulp and paper, and beef supply chains will be helping to achieve zero net deforestation. To deliver this goal, these companies have set deadlines by which they will be procuring only commodities that were produced in line with certain sustainability standards. The banking industry, through the Banking Environment Initiative (BEI), has been working with these companies to establish how, in practice, banking services can be aligned with this major client-led transformation.

CISL has authored a paper describing a documentary trade finance solution developed by a group of leading commodity buyers, trading houses, international trade finance banks, development banks, trade finance industry bodies and international NGOs, convened by CISL. The paper details the simple means by which internationally recognised sustainability standards associated with individual commodities can be integrated into Letters of Credit (LCs) that support the international trade of commodities.

By allowing trade finance banks to differentiate between ‘Sustainable Shipments’ and conventional ones, the ‘Sustainable Shipment’ LC opens up the opportunity for banks to incentivise growth in the trade of sustainably produced commodities.

The BEI is now working with the International Chamber of Commerce Banking Commission and BAFT to explore how these incentives mechanisms could be taken to scale.

Download the paper.

To participate in this initiative or to request more information, please contact Andrew Voysey, Development Director, Finance Sector, CISL: andrew.voysey@cisl.cam.ac.uk / +44 20 7216 7530.

BEI Forum, 24 June 2014, Hong Kong: The annual conference for international banks and corporations working towards sustainable global trade.

Hong Kong

The Banking Environment Initiative Forum is coming to Asia in 2014. Following on from a successful session at Davos, this year's event will feature ground-breaking work in using trade and supply chain finance instruments to encourage sustainability in agricultural commodities. Hong Kong, with its status as a regional trade hub, is the ideal location to bring together all the participants in this crucial project.

The Forum will gather together banks, producers and corporations who are leading the way in directing capital towards sustainable commodity supply chains. A mix of keynote sessions, real-world case studies and interactive panels will leave participants better equipped to succeed in a world where sustainability is becoming the key driver for global policy and trade.

Full details of the event, and how to participate, are on the BEI Forum 2014 website. 

BarclaysBNY MellonChina Construction Bank
Deutsche BankLloyds Banking GroupNomura
Northern TrustSantanderSumitomo Mitsui
Westpac
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BEI Report: An Options Approach to Unlocking Investment in Clean Energy

BEI Forum 2012:
Keynote Address by HRH The Prince of Wales

HRH The Prince of Wales delivers his keynote address to the inaugural Banking Environment Initiative Forum 2012

Get Involved

The BEI is open to working with banks or corporates from anywhere in the world that have an interest in working together to advance sustainability.

For more information, please contact the BEI Secretariat:

Andrew Voysey, Development Director – Finance Sector

T: +44 (0)20 7216 7530
M: +44(0)7595 106458
andrew.voysey@cisl.cam.ac.uk