Relevant Issues (5 of 26)
Why are some issues greyed out?The SASB Standards vary by industry based on the different sustainability-related risks and opportunities within an industry. The issues in grey were not identified during the standard-setting process as the most likely to be useful to investors, so they are not included in the Standard. Over time, as the ISSB continues to receive market feedback, some issues may be added or removed from the Standard. Each company determines which sustainability-related risks and opportunities are relevant to its business. The Standard is designed for the typical company in an industry, but individual companies may choose to report on different sustainability-related risks and opportunities based on their unique business model.
- GHG Emissions
- Air Quality
- Energy Management
- Water & Wastewater Management
- Waste & Hazardous Materials Management
- Ecological Impacts
- Human Rights & Community Relations
- Customer Privacy
Data SecurityThe category addresses management of risks related to collection, retention, and use of sensitive, confidential, and/or proprietary customer or user data. It includes social issues that may arise from incidents such as data breaches in which personally identifiable information (PII) and other user or customer data may be exposed. It addresses a company’s strategy, policies, and practices related to IT infrastructure, staff training, record keeping, cooperation with law enforcement, and other mechanisms used to ensure security of customer or user data.
Access & AffordabilityThe category addresses a company’s ability to ensure broad access to its products and services, specifically in the context of underserved markets and/or population groups. It includes the management of issues related to universal needs, such as the accessibility and affordability of health care, financial services, utilities, education, and telecommunications.
- Product Quality & Safety
- Customer Welfare
- Selling Practices & Product Labeling
- Labor Practices
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model and Innovation
Product Design & Lifecycle ManagementThe category addresses incorporation of environmental, social, and governance (ESG) considerations in characteristics of products and services provided or sold by the company. It includes, but is not limited to, managing the lifecycle impacts of products and services, such as those related to packaging, distribution, use-phase resource intensity, and other environmental and social externalities that may occur during their use-phase or at the end of life. The category captures a company’s ability to address customer and societal demand for more sustainable products and services as well as to meet evolving environmental and social regulation. It does not address direct environmental or social impacts of the company’s operations nor does it address health and safety risks to consumers from product use, which are covered in other categories.
- Business Model Resilience
- Supply Chain Management
- Materials Sourcing & Efficiency
- Physical Impacts of Climate Change
Leadership and Governance
Business EthicsThe category addresses the company’s approach to managing risks and opportunities surrounding ethical conduct of business, including fraud, corruption, bribery and facilitation payments, fiduciary responsibilities, and other behavior that may have an ethical component. This includes sensitivity to business norms and standards as they shift over time, jurisdiction, and culture. It addresses the company’s ability to provide services that satisfy the highest professional and ethical standards of the industry, which means to avoid conflicts of interest, misrepresentation, bias, and negligence through training employees adequately and implementing policies and procedures to ensure employees provide services free from bias and error.
- Competitive Behavior
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
Systemic Risk ManagementThe category addresses the company’s contributions to or management of systemic risks resulting from large-scale weakening or collapse of systems upon which the economy and society depend. This includes financial systems, natural resource systems, and technological systems. It addresses the mechanisms a company has in place to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure. For financial institutions, the category also captures the company’s ability to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements related to the complexity and interconnectedness of companies in the industry.
Disclosure Topics (Industry specific) for: Commercial Banks
Ensuring the privacy and data security of personal financial data is an essential responsibility of the Commercial Banks industry. Entities that fail to manage performance in this area are susceptible to decreased revenue and consumer confidence. As growth in mobile banking and cloud storage continues and more of banks’ operations become technology- and internet-dependent, data security will be an increasingly important issue to manage. Sophisticated technology and continuous training of personnel are essential in a world of growing cybersecurity threats. The metrics for this disclosure topic focus on providing more detail on efforts related to safeguarding data against emerging and continuously evolving cybersecurity threats and technologies, and actual security breaches compromising customers' personally identifiable information (PII). Enhanced disclosure on management strategies to address these risks will allow shareholders to understand how commercial banks are protecting shareholder value.
Financial Inclusion & Capacity Building
Commercial banks, as their primary business activity, have to continuously balance their capacity building efforts with the risks and opportunities associated with lending to unbanked, underbanked, or underserved customers. Emerging financing models and technologies provide banks with an opportunity to offer products and services in previously underserved markets and obtain additional sources of revenue. Firms that are able to meet the need to extend credit and financial services to low-income populations and small businesses while avoiding predatory and irresponsible lending practices are likely to create long-term value and enhance social capital. These services should also be complemented by efforts to improve financial literacy, which will ensure that customers make informed decisions. The recent financial crisis demonstrated the importance of diversified and resilient funding sources that these communities can provide. By disclosing their approach to financial inclusion and capacity building, commercial banks can provide investors with decision-useful information for assessing banks' ability to ensure long-term, sustainable value creation.
Incorporation of Environmental, Social, and Governance Factors in Credit Analysis
As financial intermediaries, commercial banks contribute to significant positive and negative environmental and social externalities through their lending practices. Environmental, social and governance (ESG) factors can have material implications for the underlying entities, assets and projects to which commercial banks lend across a range of industries. Therefore, entities increasingly must examine ESG factors when determining the quality of collateral. Commercial banks also may enable positive environmental and social externalities to generate significant revenue streams through their lending practices. Commercial banks that fail to address these risks and opportunities could face diminished returns and reduced value for shareholders. Commercial banks should subsequently disclose how ESG factors are integrated into lending processes and the current level of portfolio risk associated with specific sustainability trends. Specifically, investor and regulatory pressure is mounting for banks to disclose how they address climate change related risks.
Entities participating in commercial banking activities face risks and opportunities related to the greenhouse gas emissions associated with those activities. Counterparties, borrowers or investees with higher emissions might be more susceptible to risks associated with technological changes, shifts in supply and demand and policy change which in turn can impact the prospects of a financial institution that is providing financial services to these entities. These risks and opportunities can arise in the form of credit risk, market risk, reputational risk and other financial and operational risks. For example, credit risk might arise in relation to financing clients affected by increasingly stringent carbon taxes, fuel efficiency regulations or other policies; credit risk might also arise through related technological shifts. Reputational risk might arise from financing fossil-fuel projects. Entities participating in commercial banking activities are increasingly monitoring and managing such risks by measuring their financed emissions. This measurement serves as an indicator of an entity’s exposure to climate-related risks and opportunities and how it might need to adapt its financial activities over time.
The regulatory environment surrounding the Commercial Banks industry continues to evolve in various jurisdictions globally. Commercial banks must adhere to a complex and inconsistent set of rules relating to performance and conduct as well as disclosure on issues including insider trading, anti-trust, price fixing, and market manipulation. In addition, commercial banks are subject to rules against tax evasion, fraud, money laundering, and corrupt practices. Finally, in some jurisdictions, enhanced rewards for whistleblowers may increase the number of complaints brought to regulators. Firms that are able to ensure regulatory compliance through robust internal controls will be better positioned to build trust with clients, leading to increased revenue, and to protect shareholder value by minimising losses incurred as a result of legal proceedings.
Systemic Risk Management
The 2008 financial crisis highlighted the importance of managing risks to capital in the Commercial Banks industry. Specifically, firms that failed to manage the risk suffered significant losses to the value of their financial assets while increasing the amount of liabilities held on their books, which, due to the interconnectedness of the financial system, contributed to a significant market disruption. The systemic nature of the risk results from the interconnectedness of financial institutions and has become a central concern of national and international regulators. As a result, many banks are required to undergo supervisory stress tests to evaluate whether the entity has the capital to absorb losses, continue operations, and meet obligations in the event of adverse economic and financial conditions. Their failure to meet regulatory requirements could substantially raise future compliance cost as well as lead to monetary penalties. In an effort to demonstrate how the risks associated with banks’ size, complexity, interconnectedness, substitutability, and cross-jurisdictional activity are being managed, commercial banks should enhance disclosure on quantitative and qualitative metrics measuring how well they are positioned to absorb shocks arising from financial and economic stress and meet stricter regulatory requirements.