ECPI, the Italy-based sustainability researcher and index firm, has booted the Royal Bank of Scotland (RBS) and HSBC from its Global Ethical Equity Index, following downgrades in their ESG ratings.
ECPI, which is based in Milan and with an office in Luxembourg, said that since the banks, as well as US telecoms firm AT&T and US oil firm Chevron, had been downgraded to an “F” on ESG issues, they were no longer in the 300-member index.
“The F-rating means that the company displays poor long-term strategic attitude, weak operational management and an ineffective/negative contribution towards society and the environment,” the index provider said.
ECPI said RBS and HSBC’s main liabilities were their relationship with clients. RBS also had a problem with disclosure, while HSBC’s other liabilities were corruption and bribery, it said.
To support its negative view, ECPI cited, among other examples, the current investigation by international regulators to determine the extent to which both banks were involved in the Libor interest-rate rigging scandal.Another example given was a potential £2.4bn (€3bn) lawsuit against RBS alleging that the bank misled investors during a £12bn rights issue used to finance its takeover of Dutch bank ABN Amro. The takeover happened five months before RBS was bailed out by the UK government.
“HSBC is also under investigation by a US Senate panel for money laundering. Analysts believe any fine HSBC receives could run beyond $1bn,” ECPI says in its analysis.
But HSBC and RBS only scored poorly on social and governance issues. Their environmental record was deemed to be between “fair” and “very good.”
ECPI also banned Centrica, a UK energy firm, from the Global Ethical Equity Index despite scoring well on ESG issues. ECPI said the reason for the removal was Centrica’s involvement in a controversial sector, namely nuclear power.
Launched in 2007, ECPI provides institutional investors, banks and asset managers with ESG research, using a database of more than 4,000 companies.