The Interfaith Center on Corporate Responsibility (ICCR), the investor body with more than 300 institutional investors representing over $100bn (€78.1bn) in assets, is planning to publish a ranking of major US banks analysing their performance in four key governance areas.
The banks under scrutiny are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and Wells Fargo.
The ranking, based on questionnaires sent to the banks, will look at key performance indicators relating to risk management, investment and lending practices, executive compensation, and lobbying/political contributions.
The project was started earlier this year with environmental, social and governance (ESG) research firm, and ICCR member, Sustainalytics. The ICCR plans to publish its findings early next year and hopes it will help with investor engagements with the banks.
The risk management section will look at derivatives and newer practices such as high frequency trading and ‘dark pool’ trading. Says the ICCR: “Understanding the level of board and management oversight of these practices as well as their degree of compliance with regulatory standards will help us evaluate their diligence around managing risk.”In addition, responsible lending has been a “perennial topic” of ICCR’s engagement with banks. The report will look at payday lending and the extent to which banks integrate ESG criteria, to help institutions avoid investments with unintended impacts.
As for executive pay, the banks will be asked to disclose the indicators they use to gauge performance.
On lobbying and political contributions, the ICCR asks that the payments are “carefully examined and fully disclosed”.
“It is our hope that the information will benefit not only investors, but the banks themselves,” said Sustainalytics’ Senior Analyst Sheila Oviedo.
The ICCR’s financial services group has been in dialogue with banks for almost 40 years calling for greater transparency and oversight, the body says in its new annual report called Valuing Questions, Questioning Values.
“While progress has been made on several fronts, it is difficult not to despair at the seeming pervasiveness and intractability of the problems facing the industry,” the report adds.
“With each new scandal we think ‘maybe this time they will get it’, and then we open the morning paper to see that we still have work to do,” says Rev. Seamus Finn of the Missionary Oblates of Mary Immaculate.