Commercial, GHG Emissions - February 26, 2021 - By Stacie Haas, Fifth Third Bank
How a Focus on ESG Led to a Bank's Carbon Neutrality Achievement
Public companies have a responsibility to deliver long-term sustainable value, but the definition of that value has evolved beyond a return on investments for institutional and individual investors. The definition today is greatly expanded to include environmental, social and governance matters, or ESG. In 2019, Fifth Third Bank, a top 10 regional bank headquartered in Cincinnati, determined to be a top quartile performer in terms of ESG reporting. Just over a year later, Fifth Third became the first regional commercial bank to achieve carbon neutrality, an achievement that wouldn't have been possible without a strategic focus on ESG.
How did it happen so quickly? Because ESG was already ingrained into the bank's DNA—and responsibility for it was consolidated into the Investor Relations department, that, like an air traffic controller, sought to understand and report on all the bank's work in the relevant areas—20 departments in all.
At the time the goal was set, Fifth Third hadn't formally reported on ESG beyond responding to the CDP (formerly the Carbon Disclosure Project) annual climate change survey or a limited board and employee demographic data chart. The bank hadn't published an ESG Report or provided relevant disclosures on topics such as business ethics, third-party management, or workplace safety and security. What it had done was publish comprehensive reports on its commitment to serve communities, which also included how it served consumers, businesses, employees, and the environment. These reports were important but lacked the consistent disclosure of metrics to complement the published narrative. Without the critical data points, the bank was missing an opportunity to show progress year-over-year and benchmark against peers. It also meant that ESG data providers struggled to find and understand the level of the bank's commitment.
In simple terms, the spirit of ESG was not new to the company. Fifth Third was founded in 1858 and, in short order, developed a reputation for giving back to the community. The Bank was among the first financial institutions in the country to establish a corporate philanthropic foundation in 1948. The prevailing belief at the company has been, for many years, if you build a better community, you build a better bank. It is a foundational principle that continues to serve the company well. Fifth Third Chairman and CEO Greg Carmichael often says, "it's about doing well by doing good." That's the lens from which ESG performance is viewed at the bank.
Consolidating ESG data reporting and analytics under the Investor Relations department, which rolls up to Finance, was the critical first step. While ESG lives under various lines of business and staff departments, the establishment of ESG analytics in Finance enabled a full view of the company from one area accountable for leadership progress under the E, the S, and the G, collectively. It freed up subject matter experts in departments like mortgage, community development, environmental operations, human resources, and corporate governance to lead, and for Investor Relations to collect data, synthesize, and report on their efforts.
"ESG reporting makes sense within Investor Relations," said Mike Faillo, vice president and director of ESG data analytics and reporting, "precisely because we can take stock of the increasing importance of ESG to institutional investors like Blackrock and communicate that to the various departments who do the important work. They can stay focused on their missions to improve lives in the community, advance inclusion, or be an employer of choice while we can keep them abreast of ESG developments, expectations, and best practices. This enables Fifth Third to continue doing the right things as we've always done, and also ensures that we are reporting on our efforts appropriately. Collectively, it's how we deliver long-term value to all of our stakeholders."
The Investor Relations team began with a deep dive into the often confusing and conflicting world of ESG reporting. It undertook a massive staff effort to understand the various ESG frameworks and standards, like the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the United Nations Sustainable Development Goals (UNSDGs). The Bank became members of the SASB Alliance and the GRI Community in 2020 as well as a Task Force on Climate-related Financial Disclosures (TCFD) supporter. It also worked within the company to identify 10 of the 17 UNSDGs that align to the Bank's specific ESG goals.
Aligning the bank's goals became possible only after evaluating the environmental, social and governance topics that were most material to the company through discussions with executive leaders and stakeholders, including shareholders, customers, employees, communities, and regulators. A survey was distributed to representatives from stakeholder groups. Based on the feedback received, the Investor Relations team evaluated and prioritized the topics.
Part of the establishment of ESG accountability was to formalize an ESG Committee consisting of leaders from across the bank to focus on ESG policies and programs. The ESG Committee was also made directly accountable to the Nominating and Corporate Governance Committee of Fifth Third's Board of Directors. This direct line to the Board is critical to the success of the ESG program. It is accountability at the highest level, and it places ESG management and advisory services into the hands of experienced board members, 60 percent of whom are experienced in ESG matters.
The culmination of all these efforts—setting a top quartile ESG goal, establishing ESG responsibility within Investor Relations, and formalizing accountability up to the Board of Directors resulted in several key ESG accomplishments:
Achieving Carbon Neutrality for the bank's 2020 operations (scope 1, scope 2, and business travel under scope 3)
Earning an A- leadership band rating from CDP for 2020 and 2019
Establishing an $8 billion sustainable finance goal
Formalizing a Human Rights Statement
Publishing an award-winning inaugural ESG Report
Notable improvements in ESG scores from data provider organizations, such as RobecoSAM (now S&P Global).
Another key to success was ensuring that all the information published in the ESG Report reached the intended audiences. Partnership and engagement with the bank's Corporate Communications and Marketing departments in producing the ESG Report and distributing ESG-related news were essential to Fifth Third's progress.
The journey to ESG leadership and excellence at Fifth Third Bank continues on. In just over one year, the bank was able to take giant leaps in both its understanding of ESG and its impact on the company and the outside world. This is especially true, if, like Fifth Third, corporations are already doing many of the right things to serve their stakeholders. It just takes a strategic focus to make a huge leap from relative obscurity to the first bank to achieve carbon neutrality.
Stacie Haas is vice president and senior public relations manager at Fifth Third Bancorp, a diversified financial services company headquartered in Cincinnati, Ohio, and the indirect parent company of Fifth Third Bank, National Association, a federally chartered institution. She serves as spokeswoman and shares Fifth Third's environmental, social and governance performance with customers, communities, employees, and shareholders. Fifth Third has $205 billion in assets and operates 1,134 banking centers in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia, North Carolina, and South Carolina.
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