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Sustainability – Shanghai World CSR Conference (3rd and 4th November)

- Peter Hepenstall – Barclays (15-20 minute key note speech)

Good afternoon ladies and gentlemen, fellow delegates, Chief Executives, esteemed

colleagues, heads of the China Banks – and other dignitaries present. It’s very nice

to be in Shanghai for this conference.

It is my great honour and privilege to be invited to speak at this forum and to share

with you my Company’s ambition to make Sustainability, or as we call it ‘Citizenship’,

central to our brand. This is not just a regional aspiration. It is what we at Barclays

see as being central to our strategic vision for our brand and organisation.

My name is Peter Hepenstall and I am the Vice President of Risk, Sustainability and

Environment for Barclays for the Asia Pacific, India and Middle East regions.

It is encouraging that forums such as these are increasing in frequency and in size

and are creating some truly constructive dialogue in what are some of the profound

challenges that our world is facing - and will continue to face in the future.

The issues surrounding the environment – be they lack of resources, clean energy,

clean air or climate change – are very real and they are without question reaching a

tipping point. The concussion of these issues are real and catastrophic and effect our

and the planet’s species in a potentially ruinous way.

The economic impact of climate change alone is costing the world in excess of $1.2

trillion a year. This is only a conservative estimate but there is no doubt that these

costs are only going to increase in the future unless we find radical new solutions.

Already at this level the cost of inaction is now greater than the cost of action. This is

the conclusion of Felipe Calderon’s New Climate Economy Commission, and it is

also the experience shared by our clients - one such well known manufacturer have

publicly stated that climate-change/global warming related natural disasters are

already costing the company around €300 million a year.

The problems are complex, they are long term and they need big organisations and

governments and NGO’s to collaborate to help address them.

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At Barclays – addressing the matters of Climate Change and global warming and all

of the calamitous consequences that relate to these very big issues are central to our

vision – plainly and simply because businesses which don't deal with it won't survive.

This is hard-nosed reality, not altruism;

Rather than focus on the problems here today, I want to talk a little about both the

solutions and the opportunity that exists for firms who are leading this agenda.

I am sure that many of you are aware of Barclays – hopefully because we are one of

the oldest and largest financial institutions in the world – and not simply because we

are the name behind the English Premier League Football.

According to Relbanks.com, Barclays is the tenth largest bank globally by total

balance sheet assets. We understand fully the responsibility that comes with our

brand. We directly employ in excess of 120.000 staff – engage suppliers more than

double that number, occupy tens of millions of square metres of property and provide

finance to business and industry in the many hundreds of billions of dollars.

Our footprint in Asia is large and our presence in Greater China and Hong Kong has

been long. We understand the importance of China as a market place and we are

seeking to partner and to grow with the formidable and impressive China Banks –.

such as the China Agriculture bank and the China Development Bank. We marvel at

the enormous and remarkable manufacturing and export industry of China that

dominates global supply.

We understand and applaud too that China was one of the first governments to

demonstrate tangible collaboration between the Banking Regulator (CBRC) and the

Environment ministry in pursuit of more sustainable operations with their Green

Credit Programme and we see this as an exceptional model for other nations to

follow.

However my talk today is on the issue of Sustainability and the importance that we –

as a key player in the financial sector – have in establishing and then driving a

positive influence on what is undoubtedly one of the most critical issues the world as

a whole is facing.

It is a matter that we at Barclays take seriously.

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The concept and practice of Sustainability is the central axis around which all of

these issues must be addressed. Critically, these issues will not be solved by a

single organisation in isolation – we must work together across our sector and

beyond to develop effective partnerships.

As the economic axis of the planet shifts so does the moral authority - and the

financial power. The extent of the new fast-growth economic & political powers to

steer the sustainability agenda is as real as it is astounding.

It is doing so.

China especially.

That's why we are all of us are here in China today. It is why there are so many

people in this room it is why the banking regulators are steering the banks in this

area

A strong example of this is the Banking Environmental Initiative, which Barclays’

Chief Executive Antony Jenkins chairs and in which we take an active role.

The BEI’s primary focus is on delivering sustainable solutions which respond to client

and market needs, and to initiate and support industry-wide collaboration to deliver

momentum.

In its most recent forum in Hong Kong in June of this year, Antony Jenkins led a

group of representatives of global financial institutions to specifically explore ways

that banks can work with their clients to promote sustainable means of production.

To incentivise it.

It is all starting – and in fact it has started – with ‘soft’ commodities that include

timber, pulp, paper, soy and palm oil.

The Hong Kong forum laid the groundwork for the BEI to broaden its remit by

including more financial institutions and companies in its working groups and

intensifying its engagement in Asia. China will be pivotal in this program.

The existing BEI members - Barclays, Deutsche, Westpac, Nomura, Lloyds,

Santander, SMBC, Northern Trust and the China Construction Bank gave an

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absolute commitment to build on the BEI’s alliance with commodities and consumer

goods companies in order to combat the critical issue of global deforestation. Whilst

not all BEI Members have fully endorsed this compact – there is a growing ground

swell of support for this and other initiatives by communities, governments and

industry sectors.

More and more Banks are joining the BEI – the latest two being Standard Chartered

and Goldman Sachs – just in the last couple of months.

We collectively now have a very loud voice.

We demand to be heard.

It was agreed that the BEI would push ahead with a program to foster sustainable

trade in agricultural commodities via such financial products as the BEI’s recently

introduced Sustainable Shipment Letters of Credit.

These are financial instruments that can be used by banks to incentivise the

international trade of sustainably produced commodities. The International Finance

Corporation (IFC) has confirmed that it will offer preferential terms for this type of

shipment to its partner banks and offer significant potential reductions in the cost of

capital. It is responsible banking at its very best.

The CEO’s of some of the worlds biggest buyers of agricultural commodities –

through the Consumer Goods Forum – have made public commitments to transform

their supply chain practices. By 2020 their Palm Oil, Soy, Paper and Pulp 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 those commodities that were produced in line with recognised

standards such as the RSPO - in the case of palm oil.

The banking industry – through the BEI – has been working closely with these

companies to establish how, in practice, banking services can be aligned with this

major client-led transformation.

A comprehensive paper has been authored that describes a documented trade

finance solution developed by a group of leading commodity buyers, trading houses,

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international trade finance banks, development banks, trade finance industry bodies

and international NGO’s.

The paper details the simple means by which internationally recognised

sustainability standards associated with individual commodities can be integrated

into Letters of Credit (LC’s) that support the international trade of commodities.

By allowing trade finance banks to differentiate between “Sustainable Shipments”

and conventional ones, LC’s open up the opportunity for banks to incentivise growth

in the trade of sustainably produced commodities.

These mechanisms are now in place and are being delivered with both momentum

and scale. The billion dollar Palm Oil industry is the first sector to be effected and

these Sustainable Letters of Credit are being issued now. In this year alone Barclays

have issued eight.

Through the BEI we have an absolute determination to help change the world for the

better and we head a forum of like thinking financial institutions that will – without

question – introduce positive change and responsible banking. We have a very clear

road map and a moral compass to drive this journey to conclusion.

Make no mistake though – no one sector of society can solve this on its own

Governments, Business and NGO’s need to work together on a global scale and in a

manner that is pragmatic, systematic and practical. Barclays and our competitors

see this very clearly and we are investing heavily in these markets.

We see Africa as a huge and developing market and have recently invested $500

million in supporting the solar energy business on this continent.

We are not alone.

In New York on the 1st October – Barclays announced its commitment to invest at

least £1bn of our liquidity pool into green bonds. These bonds are designed to raise

capital to fund low-carbon projects, such as wind farms, and our commitment

represents by far the largest investment by a bank in this sector.

We also see ourselves as walking the talk and this is actually the primary message I

would like to deliver today. Large Banks and Manufacturers and the very big

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companies that I see represented in the audience today need to lead by example.

This is in the manner that we conduct our business, the education we provide to our

staff, the process of delivering responsibility in the communities in which we operate

- and by setting positive examples.

In Barclays our real estate decisions are based now on occupying energy efficient

and environmentally efficient buildings. This is not only a responsible decision but it

is an increasingly more commercially viable option. It is good business. We are

engaging the real estate market to let them know our preference for Green buildings.

So we are saying to our suppliers of buildings and computers and IT and stationery

and furniture – who are our partners in our business operations - if you want to do

business with us you work with us to demonstrate responsibility and care and

commitment. We will support you in these endeavours and ultimately evaluate you

on your environmental duty of care. We will ultimately not tolerate poor performance

or nonchalance and there will be a point in time that we will admonish poor

performers and we will not purchase their goods or services.

A very good example of this occurred in this very region some four years ago. It was

when the tender for our Asia Pacific courier services went to market. We move

thousands of pieces of mail and parcels and allotments of IT equipment and furniture

by air and by road. One of the principal criteria we set was for a global vendor to step

up and capture the amount of carbon that was consumed for every transaction and

consignment that was conducted for the bank. The US courier service did step up

and they built a propriety system that they were already tinkering with specifically for

Barclays. They were not only able to capture the carbon consumed for each of the

Bank’s courier transactions but they went a step further and offset it on our behalf.

It is a program that they called “Go Green” which they later launched globally – and

we now utilise it in other parts of the world. It is something that both Barclays and the

Service provider were immensely proud of and it wasn’t that difficult to implement

either. The Service provider now offers it to many of their other corporate clients and

it is immensely popular and hugely successful.

It is good business.

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We are also now pushing into the renewable energy arena and are requesting that

our Landlords allow us – indeed support us – in installing clean energy solutions. We

have illuminated many of our large corporate signs in the Asia Pacific region by solar

power and in South Africa we operate a large solar farm that feeds one of our

landmark buildings.

On cost and resilience factors alone is beginning to make commercial sense but we

also wish to deliver a message to the communities in which we operate that we are

an environmentally responsible firm that understands the scarcity of petroleum

resources, we understand that fossil fuels are a scarce and diminishing resource and

that carbon causes damage - and we see great social and economic benefits in

harnessing the power of the sun. We see further potential in wind power as well –

and in our own operations and in our investment portfolios we are actively seeking

out how to more effectively support the RE sector.

These are just some examples of the expectations that our customers are having of

us.

Barclays wants to be seen as leaders in the area of Sustainability. We acknowledge

that we don’t have all the answers however we see this as an opportunity to play our

part in being better global citizens but also as a sensible opportunity to gain

commercial advantage that is beyond a mandatory requirement. We see it to be a

fundamental and increasingly essential part of the way we do business.

Being a responsible brand is also a part of Responsible banking and we wish to

share our passion and experience with our China friends and clients and our fellow

banks.

We must.

Thanks very much again for allowing me to share this update with you, and I look

forward to hearing from many others who are doing extraordinary things throughout

the day.