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The G of Environmental, Social and Governance drew a lot of focus at Credit Suisse in 2021. It has been a challenging period with the Archegos and Supply Chain Finance Funds matters and, in early 2022, a change in leadership of our Board of Directors. We deeply regret that these incidents have caused significant concerns for our stakeholders, and would like to thank them for their support during these times.
We have been, and remain, committed to addressing these issues and other legacies, recognizing that sustainable policies and strategies begin with strong governance. We have taken decisive action when needed, and are committed to learning from all of these matters as part of our ongoing remediation. Already, significant changes to our organization and risk management policies have been implemented where needed.
As part of this effort, we made significant changes to our strategy after careful consideration by the Board of Directors and Executive Board. Our new Group strategy centers on three pillars: Strengthen, Simplify and Invest for Growth. We are organized around four divisions, including a unified, global Wealth Management division, a global Investment Bank, a Swiss Bank and an Asset Management division, with sustainability a core element of our value proposition to our clients, shareholders and employees.
More broadly, the year 2021 saw a welcome, albeit uneven, recovery for global economies amid a heightened focus on sustainability around the world.
Improvements in labor markets were a positive development for many families and communities. The rollout of COVID-19 vaccines highlighted the power of science to transform lives, even as their distribution underscored some of the persistent gaps between developed and emerging economies.
Yet even amid all of the uncertainties and strains surrounding economies and societies in 2021, the world kept moving. Countries in developed and emerging markets announced targets for carbon neutrality. Companies firmed up net-zero commitments. The financial industry embraced partnerships and standard setting to help create transparency around ESG (Environmental, Social, Governance) policies.
The economic recovery of 2021 underscored the importance of emphasizing the ESG approach, not simply as something that is good for society, but also as an essential ingredient of good business strategy and lasting economic prosperity.
The COP26 summit in Glasgow in November displayed ongoing global progress in committing to the goals of the Paris Climate Agreement, but also highlighted that there is much to do. Businesses, governments and civil society came together with a shared purpose to deal with pressing global issues from climate change to biodiversity, generating fresh momentum for 2022 and beyond.
As a global company operating in about 50 countries, we at Credit Suisse continuously reflect on our place in the world, guided by the 17 United Nations Sustainable Development Goals (SDGs). And while our organizational structure changed as a result of our Group strategy, we reaffirm the sustainability strategy we launched in 2020. At the same time, we regularly examine ways to better assist clients in achieving their investment objectives while having a positive influence on the environment and society.
The core of our sustainability approach comprises five pillars: delivering sustainable solutions; enabling client transitions; engaging with thought leadership; driving our own transition; and adapting our culture and engagement.
Among the highlights in this report, addressing those themes:
- We made significant progress on our commitment to provide at least CHF 300 billion in sustainable finance by 2030.
- We delivered on our firm belief that thought leadership is central to progress on sustainability. Key publications included thematic sector reports and top themes. We published our flagship Supertrends report outlining many key sustainability themes such as Technology, Millennial Values and Anxious Societies. We published a report on Biodiversity, and a trio of reports on the role of women in the labor market and financial markets. These were just one part of our heightened focus on the S—Social—of ESG.
- We were delighted to host our 5th Global Women’s Financial Forum and our inaugural Sustainability Week, which brought together thought leaders, policy makers and business and financial experts.
- We amplified our efforts to improve disclosure and drive standard setting, taking into account the recommendations of the Sustainable Accounting Standards Board (SASB, now maintained by the Value Reporting Foundation) and the Task Force on Climate-related Financial Disclosures (TCFD). Recognizing the need to achieve greater consistency, we incorporated a series of core metrics recommended by the World Economic Forum (WEF). We joined a number of industry associations, including the Net Zero Banking Alliance, which is working towards common standards on how to measure, report and set targets for carbon reduction. In February 2021, we joined the Sustainable Markets Initiative’s Financial Services Taskforce, a collaboration of around a dozen global banks convened by HRH the Prince of Wales to accelerate the financial industry’s transition to net zero.
- We continued to progress our 2050 net zero emissions commitment, by developing reduction pathways for the highest carbon emitting sector exposures and expanding efforts to align our financing activities with the Paris Agreement global warming limit of 1.5º C. Furthermore, we introduced a time-bound commitment to restrict financing and capital market underwriting to businesses involved in activities related to thermal coal mining and coal power. This was on top of sector restrictions we described in our 2020 Sustainability Report.
- We trained employees in ESG and continued our investments in talent and education to strengthen sustainability governance. Furthermore, we revised ESG-linked Executive Board compensation scorecards.
This Sustainability Report is an integral part of our ongoing dialogue with stakeholders and we are delighted to share it with you.
Context for our ESG Disclosures
We would also draw our readers’ attention to the evolving practices when it comes to ESG reporting. The disclosures contained within this report are inherently limited by the emerging science and market practices, the requirement to use estimates for certain figures, the dependency on management judgments in the absence of established methodologies and the reliance on third party and other data that may be immature in some instances. We strive to be transparent on these limitations to our disclosures throughout the report.
This is particularly relevant when it comes to our Climate Risk / TCFD related disclosures, where several judgments are applied. For example, our disclosure on Weighted Average Carbon Intensity (WACI) for the top 50 loans to upstream fossil fuel producers relies on the availability of external data on emissions, in terms of timeliness, coverage and accuracy. With reference to client emissions data, we source this from available sources or proxies based upon a preferred list of options approved by our internal governance committee (starting with CDP data as our preferred source but if this is not available, we will also look at other internal and external sources), due to the lack of granular industry standards.
Our WACI disclosure is also a good example of how some ESG disclosures, by their nature, require future restatements. Our WACI results are presented as preliminary 2021 results, as they are based on lending exposures as of December 2021 and emissions / financial client data as of December 2020. This discrepancy is inevitable given that emissions data is normally reported during the second half of the following year while financial data is reported with heterogeneous timelines across the portfolio. Our preliminary 2021 results will be updated to final 2021 results in our 2022 reporting cycle. This lag in data availability also impacts our Fossil Fuel Production Mix for the top 50 loans to upstream fossil fuel producers, where we again show preliminary 2021 results based on lending exposures as of December 2021 and fossil fuel production data as of December 2020.
When it comes to our Exposures to Carbon-related Assets and Climate-sensitive Sectors we use gross exposure for reporting (as opposed to exposure net of collateral and credit mitigation), given the focus of capturing how much financing Credit Suisse provides to carbon-related or climate sensitive businesses. In line with TCFD recommendations, our exposure data is captured via an internal risk management metric as opposed to an accounting metric.
Our Climate Risk disclosures are also impacted by the lack of granular industry standards to underpin methodologies. For instance, the Net Zero Trajectory for Oil, Gas and Coal metric is based on absolute emissions associated with lending exposure to clients operating in the in-scope sectors based on drawn amounts. Underwriting business and midstream companies’ methodologies are not mature, although we recognize the importance of expanding this scope when possible and note our intention to cover additional businesses as we evolve our approach. Therefore, our results shared in this report should be viewed as preliminary 2021 results, and we anticipate that our final 2021 results, when presented in 2022 reporting, may be different.
In other instances, we are reliant on internal frameworks and judgments being applied. For instance, our Sustainable Activities Framework (SAF) is an internally created framework that governs our disclosures relating to our progress against our Sustainable Finance commitment. The application of the SAF requires expert qualitative assessment, on a transaction-by-transaction basis, on whether a particular transaction should count towards our commitment. As there is no external guidance or established peer practice, we have exercised our own judgment in the development of the methodology to account for these transactions. We have sought to be transparent in this regard, with the SAF externally published in the fourth quarter of 2021. Our Client Energy Transition Framework disclosures in our Climate Risk disclosures also involve the application of internally-defined criteria, which carries a degree of subjectivity.
In addition, our implementation of internal frameworks is an ongoing multi-year process. This may impact the completeness of some disclosures, including those relating to our Sustainable Assets under Management, where work is ongoing to classify not only new but also existing investments in line with this framework.
We are on a continuous journey to advance our ESG disclosures and we recognize that greater comparability insight in the future will further aid our readers’ understanding.
In conclusion, while we are proud to present our 2021 progress in this report, we note that this should also be viewed as preliminary progress in some areas, as a result of the above-mentioned factors. We expect that certain disclosures, including our climate-related disclosures, are likely to be amended, updated, recalculated and restated in the future.