The Path forward by Remon Houweling

The financial sector from a non-financial perspective

The Path forward

Table of Content 1 2

Introduction

Sustainability reporting for financial institutions

2.1 Evolution of sustainability reporting 2.2 Sustainability reporting for financial institutions

7 7

Benchmark

3.1 Approach 3.2 Results

9 9

Reporting quality

4.1 4.2 4.3 4.4

11 12 12 13

Reporting framework Report verification Levels of assurance Scope of assurance

Focus in the sustainability reports

5.1 5.2 5.3 5.4 5.5

15 15 16 17 18

Reporting materiality Reporting materiality disclosure in the sustainability reports Size of the reports Size of the reporting chapters Integrated reporting

Significant KPIâ&#x20AC;&#x2122;s and disclosures

6.1 6.2 6.3 6.4 6.5

19 21 22 24 25

Socially Responsible Investments and Equator Principles

Facts about the Key performance indicators Financial key performance indicators Social key performance indicators Environmental key performance indicators Other types of key performance indicators

Disclosure on management approach

8.1 Governance structure 8.2 Person bearing ultimate responsibility for sustainability and executive compensation

29 30

Concluding comments

9.1 9.2 9.3 9.4 9.5 9.6

Increased importance of Sustainability reporting and assurance in the financial industry sector The sustainability reports of the Financial Institutions are not dealing with the most material topics relevant for their sector Stakeholder dialogue is missing Little disclosure on SRI funds or Equator Principles Unnecessary repetition of financial KPIs and subdividing of KPIs Little disclosure on CSR governance and executive remuneration

Appendices: list of reports of organizations used in the benchmark Appendices: Glossary Who to contact

The financial sector from a non-financial perspective - The Path forward

31 31 31 31 32 32

33 34 35

The financial sector from a non-financial perspective - The Path forward

1 Introduction

The financial crisis has altered the basis of trust between stakeholders and organizations and as a consequence the financial markets focus on immediate returns is challenged by the need for a longerterm perspective. Now more than ever, organizations need to address current and future risks and pay greater attention to their medium and long-term business strategy.

Organizations are facing growing pressure to explain and improve their sustainability performance. Investors and equity analysts are building sustainability factors into their analysis and investment decisions. Consumers and non-governmental organizations (NGOs) are demanding more data regarding organizations’ environmental and social performance. Regulators and standard-setters are piling on this pressure too.

have been witnessing an increase in the number of sustainability reports published by major international organizations. According to the corporate register report: Global winners and reporting trend from April 2010, more than 3,500 organizations issued a sustainability report for 20092. This shows the importance that sustainability has taken in society and more particularly in our minds when we are in our role of consumers or stakeholders.

A recent Ernst & Young survey “The top ten risks for businesses” confirmed that ‘radical greening’ and ‘social acceptance risk and corporate social responsibility’ were now in the top 10 risks affecting businesses globally and ranked 8th and 9th respectively. Corporate social responsibility is a new entry in the top 10 risks and it indicates that businesses are more conscious than ever about managing reputation and building public trust.

Sustainability reporting can happen either through a separate sustainability report or as an elaborate integrated disclosure on this topic in the annual report. The sustainability reporting informs stakeholders about the manner in which sustainability is embedded within the organization. The transparency of an entity’s economic, social and environmental performance can enhance the organization’s reputation.

Further, another recent Ernst & Young Survey, “Competing for growth- winning in the new economy” revealed that 64% of 1,400 surveyed executives indicated that they are seeking to improve the transparency and frequency of corporate communication on their performance with stakeholders. They indicate that the major difference in performance arises in the nonfinancial area – identifying risk and risk management, increasing non-financial performance measures and significantly increasing coverage of environmental and corporate social reporting issues.1 For anyone working in the reporting arena, the last decade could easily be referred to as the “decade in which sustainability was born”. Indeed for the last couple of years we

This report focuses on the current status of sustainability reporting of Top 20 European financial services organizations based on a review of their sustainability reports issued in 2010 (see also section 3). These organizations are experiencing pressure from stakeholders and society to be transparent on their business activities and decisions in order to regain trust. They face the challenges of sustainability reporting with the objective of building trust, but without wanting to be in the spotlights for ‘green washing’. Despite the fact that sustainability is tailor-made for each organization, comparison within the sector shows the current practice and trends. The objective of this report is to provide insight in the common content and issues for sustainability reporting by financial institutions and where possible provide best-practice examples.

1 Ernst & Young, Competing for growth – Winning in the new economy, page 24 2 Corporate Register, CR Reporting award ’10 - Global winners and reporting trend from April 2010

The financial sector from a non-financial perspective - The Path forward

2 Sustainability reporting for financial institutions

2.1 Evolution of sustainability reporting

In order to benchmark the quality of sustainability reporting of financial institutions, it is important to have some insight in how sustainability reporting has been evolving recently, in particular for financial institutions. Sustainability reporting in the financial sector has significantly increased, with only a few of the financial institutions reporting on sustainability in the late nineties, to the majority of financial institutions now reporting on sustainability. Of the Top 20 European financial institutions included in this benchmark, 100% reported on sustainability issues whether it was on their website, in the annual report or in a separate sustainability report. This significant growth in sustainability reporting is remarkable considering that reporting is only voluntary in most jurisdictions and hardly any regulation currently exists for it. Pressure from external stakeholders Although most reporting is voluntary, organizations face growing pressure to release information. Community associations, government regulators, customers, suppliers and employees want more information about entities’ long-term impact on society. In particular, powerful customers can force organizations to become more transparent, the classic example being Walmart, which launched a supplier sustainability initiative in July 2009. Reputation management Done properly, reporting on sustainability helps organizations establish a reputation for transparency and helps builds stakeholder trust. Research conducted by the Global Reporting Initiative shows that 82% of US organizations and 66% of those in Europe cite transparency as the main factor influencing their corporate reputations.

But, there are other drivers for sustainability reporting. As mentioned before, pressure of stakeholders and society are drivers for sustainability reporting. The pressure comes from the stakeholders, i.e shareholders, customers, governments, consumers and NGO’s are requesting more and more transparency (in particular since the financial crisis) from the institutions as to their investments portfolio and lending policies. Consumers, customers, employees, and many others want to know what the strategy and position of the financial institution is regarding sustainability. This includes sustainable investments and lending policies. Stakeholders want to know the position of their financial institutions compared to their competitors. They also want to know if they are really doing what they are claiming: practice what they report. The motivations of organizations for reporting are also driven by their own will to improve their sustainable strategy and targets. They are aware that this can help put pressure on the business to implement the targets and transparency regarding sustainability.

2.2 Sustainability reporting for financial institutions The content of the sustainability reports have evolved over time. It has taken several years for the financial institutions to develop their sustainability reports and improve the level of transparency. Indeed, the first sustainability reports, published by the financial institutions in the late nineties, were mainly focusing on environmental data (the planet: P), ie. their electricity consumption and paper use. After a couple of years, the perception of significant themes for sustainability reporting

The financial sector from a non-financial perspective - The Path forward

within the financial sector was extended to the other P’s: People and Profit. The organizations started to report also on their community engagement and towards other stakeholders next to their shareholders (mostly towards their customers and employees). Nowadays financial institutions report on their governance, targets and risk management, with some comments linked to their sustainability policy. Also, as part of this development, organizations mention their memberships with international principles or guidelines such as the UN global compact, UNPRI and Equator principles.

Nevertheless, even if sustainability is becoming a major topic in reporting, several questions can still be asked such as what the major issues are in the sector regarding sustainability that financial institutions report on? What are the trends regarding sustainability reporting? In the case of financial institutions, the question is where they have the biggest impact? Where can they act in order to really be sustainable? Based on the benchmark performed, we have tried to provide some clarity and suggest areas for improvement and future action.

The financial sector from a non-financial perspective - The Path forward

3 Benchmark

3.1 Approach

In our survey we selected the top 20 European financial institutions based on total assets as per 31Â December 2009 according to the OneSource Global Business Browser3. For each of the selected institutions, we performed a review on whether the organization reported on their sustainability

16 organizations report through separate sustainability reports, 1 financial institution publishes an integrated report including annual accounts and sustainability information, and 3 institutions are reporting via their website with a short chapter in their annual report.

performance and strategy via the publication of a separate sustainability report, reporting on their corporate website, or have the sustainability

3.2 Results

report integrated in their annual financial report. TheÂ scope of the benchmark

These reports are the basis on which we have performed our review. The objective of the review was to assess the sustainability information with respect to the following five themes:

is only limited to the sustainability reports (including specific references made on the website) and interactive webbased reports for the reporting year 2009. No interviews were performed. The financial institutions included in the benchmark were 13 banks, 1 insurance company and 6 banking and insurance organizations.

1. 2. 3. 4.

Reporting quality Focus of the sustainability reports Significant KPIâ&#x20AC;&#x2122;s and disclosures Socially responsible investments and equator principles 5. CSR Governance

All the surveyed financial institutions are reporting on their sustainability performance:

What is the format of reporting? a) Separate sustainability report b) Integrated report c) web-based Total

80%

15%

100%

3 See appendix 1 for the list of Financial institutions included in the benchmark

The financial sector from a non-financial perspective - The Path forward

4 Reporting quality

The quality of the sustainability reports is enhanced by comparability and credibility. When entities use guidelines like those of the Global Reporting Initiative (GRI), this increases comparability. Credibility can be enhanced by verification by an independent party. We will elaborate further on both aspects in this section. 4.1 Reporting framework Organizations face pressure to adopt evolving voluntary reporting standards to help stakeholders compare organizations’ sustainability performance. Currently, no universally accepted set of reporting standards exist in this area, but there are some widely used voluntary guidelines that prescribe the kind of non-financial information organizations should disclose, such as the AA1000 AccountAbility Principles Standard and the GRI Reporting Framework. The GRI guidelines have been updated twice since their inception, making the current version the “third generation” or G3. Developed in consultation with private industry, it is currently used in 65 countries and comprises a set of core guidelines that apply to all organizations, plus supplementary guidance applicable to particular industries. For the financial sector the supplementary guidance is the financial sector supplement. Of all surveyed reports, 16 reports are prepared using reporting guidelines.

The guidelines that are used for the most part are the GRI G3, which were supplemented by the financial sector-specific guidelines in 11 reports we reviewed. Currently, the GRI is the most commonly used reporting framework for non-financial reporting. In the reporting year 2009, over 38% of financial organizations produced a GRI compliant report.4 Our benchmark revealed that this percentage is significantly higher for the leading European financial institutions. The GRI uses a system of Application Levels. The Application Level system provides organizations with a pathway towards continuous and gradual improvement of their sustainability reporting. The Levels are intended to motivate reporters to enhance the quality of their reporting over time. Application Levels also meet the needs of reporting organizations in terms of objectively displaying their use of the GRI Guidelines. The Application Levels indicate the extent to which the G3 guidelines have been applied in sustainability reporting. They communicate which part of the Reporting Framework has been addressed - which set of disclosures, varying with the different Levels. The Levels do not give an opinion on the sustainability performance of the reporting organization or the quality of the report. GRI requires that organizations using its guidelines, declare a reporting level

What guidelines were used in preparing the sustainability report? a) GRI 3, including sector-specific guidelines

55%

b) The general GRI guidelines only

20%

c) Other guidelines (AA 1000) d) No guidelines Total

20%

100%

4 Corporate Register, Reporting State of Play, http://www.corporateregister.com/pdf/CRRA10.pdf

The financial sector from a non-financial perspective - The Path forward

A, B, or C, depending on how the GRI indicators are applied. It also allows organizations to apply a “plus” (+) at each level if they have secured third-party verification. For the financial institutions in our survey, reporting in compliance with the GRI, we investigated as to the Application Level of their reports. The outcome of this investigation is shown below:

entities, while investment firms use them to decide whether to include the organization in a sustainable investment fund. As this trend continues, users of sustainability information will come to expect that the information has been validated by a reliable third party. Assurance sends a message that the report is relevant, reliable and free from bias. And third-party providers can often recommend ideas for improving business processes, leading to more efficient

What are the level of application used for the GRI? a) A (+)

47%

b) B (+)

20%

c) C (+)

d) undeclared Total

We found that most organizations in our benchmark had their report externally verified.

4.2 Report verification As sustainability reporting matures, stakeholder expectations are likely to increase, making external assurance virtually a requirement. Organizations now obtaining a lower level of assurance, typically described as “limited” or “negative” assurance, will come under pressure to move more towards a “reasonable” or “positive” assurance level comparable to what is applied to financial statements.

27%

100%

management of the organization overall. In addition, some executives who sign the reports may desire third-party assurance to protect their personal reputations. Some countries have already implemented rules requiring some level of verification. In May 2010, the French Parliament adopted rules strengthening the verification requirements for major organizations. Sweden requires state-owned organizations to present an independently assured sustainability report in accordance with the G3 GRI guidelines since 20095. Over time, other countries will follow this trend.

Leading organizations are already ahead: according to an Ernst & Young report, “the majority of the Fortune Global 500 most recent sustainability reports were assured by accountancy organizations. Two-thirds of the latest reports were assured by financial auditors.”6 Of the surveyed sustainability reports reviewed, 15 were verified by an external assurance provider. Thirteen of the reports were verified by a big 4 audit company, while one report consisted of a review by a big 4 company to assess the plausibility combined with an assurance report of an environmental consultant and for one report, the environmental data was verified by an environmental agency.

4.3 Levels of assurance If organizations consider having their report verified, they can opt for an assurance engagement that leads to an assurance conclusion providing limited assurance (review engagement) or an assurance conclusion providing reasonable assurance (audit engagement) or a combination of the two. A review engagement tests whether the information provided is plausible, whereas an audit focuses on the accuracy and adequacy of the information.

Has external assurance been provided on the report?

Sustainability reports are being more closely monitored than ever before. NGOs and the news media read them to assess the sustainability performance of the reporting 5 6

a) Yes

75%

b) No

25%

Total

100%

The text of France’s law is available at http://www.assemblee-nationale.fr/13/ta/ta0458.asp and the guidelines issued by Sweden’s Ministry of Enterprise, Energy and Communications are availabe at http://regeringen.se./sb/d/574/a/94125. Weathering Change: A newsletter from the Climate Change and Sustainability Services of Ernst & Young (Ernst & Young Global Limited, 2010), page 11, 5 june 2010. Available at http://www.ey.com/Publication/vwLUAssets/Weathering_Change_June_2010/$FILE/Weathering%20change_june%202010.pdf.

The financial sector from a non-financial perspective - The Path forward

Out of the 20 reviewed reports, 15 had an assurance (limited and/or reasonable) report provided by an external body: independent auditors for (part) of the report and or other stakeholders. The category “other” includes other types of reviews such as stakeholder panels, review of third parties not being auditors and also reports having a mixed assurance report, i.e. some information audited with reasonable assurance, and other information with limited assurance.

What level of assurance is provided? a) Reasonable assurance b) Limited assurance c) Other

67%

27%

100%

a) Complete report

47%

b) Only parts of the report

13%

c) KPIs

13%

d) Other

27%

100%

Total

What is the scope of the assurance provided?

Total

4.4 Scope of assurance The scope of an assurance engagement can take different formats. Assurance can be provided on the complete sustainability report, meaning that all information included in the report (both quantitative as qualitative information) is externally verified. Another option is that only parts of the sustainability report are verified. This means that only specific chapters are verified (eg the environmental chapter). Assurance on only KPI’s is another common assurance practice.

Assurance standards. There are two primary global assurance standards. The International Standard on Assurance Engagements 3000(ISAE 3000) is the benchmark that accountants most often use as a basis for assurance of sustainability reports. It was developed by the International Auditing and Assurance Standards Board (IAASB) of the International federation of Accountants (IFAC), whose standards exist primarily for assurance engagements. The other global standard, AA1000AS (2008), was designed for use beyond the accounting profession. It was created by Accountability, a global nonprofit organization. AA1000 is a principles-based standard that, in addition to reported information, also addresses management and reporting systems and processes.

The financial sector from a non-financial perspective - The Path forward

5 Focus in the sustainability reports

In their ambition to gain legitimacy, a substantial number of organizations devote much of their sustainability report to a qualitative explanation of their sustainability performance (soft disclosures). However, this often leads to long reports which are difficult to compare. Choosing the issues and indicators to focus on, and determining the reporting boundaries, are fundamental to the preparation and quality of any report. To make those choices, an organization must first establish a methodology for identifying issues that are material to stakeholders, and therefore to an organization. We reviewed whether the surveyed organizations have disclosed their materiality approach. We also looked at the size of their reports and the

investment rationale and comparison of business performance. As a benchmark, financial reporting frameworks generally explain that mis‑statements, including omissions, are considered to be material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Judgments about matters that are material to users of the financial statements are based on a consideration of the common needs of users as a group.

amount of pages per chapter. 5.1 Reporting materiality Materiality is a key aspect in sustainability reporting. It helps organizations to select what they need to disclose to stakeholders. However, the perception of what is important can differ between users, preparers and auditors due to their varying objectives. This makes it important to define materiality. There are various definitions and guidelines proposed by bodies such as the GRI, the International Accounting Standards Board (IASB) & AccountAbility. The common thread in the definitions is that materiality is the threshold or selection criteria of sustainability that would significantly influence stakeholders’ (including but not limited to shareholders) actions, decisions, or judgements on the organization such as

5.2 Reporting materiality disclosure in the sustainability reports In order to answer to the request of the readers, organizations can disclose their materiality approach, wherein they specify what they see as the most material topics for the organisation and their stakeholders. Reporting based on materiality often leads to more concise reports focusing on the strategic issues of the organization. We surveyed how the leading financial institutions are approaching materiality. Our survey revealed that only 2 institutions have a materiality matrix in their report, and only 2 organizations are disclosing on a narrative basis analysis of what are the most material topics.

Does the report contain a materiality analysis? a) Materiality matrix in the report

10%

b) Narrative disclosure on materiality approach

10%

c) No disclosure on materiality approach

80%

100%

Total

4 Corporate Register, Reporting State of Play, http://www.corporateregister.com/pdf/CRRA10.pdf

The financial sector from a non-financial perspective - The Path forward

5.3 Size of the reports Another indicator of the application of materiality is the size of the reports. There is no concrete standard for the number of pages of a sustainability report. An organization is free to choose the level of detail of reporting. It is advisable, however, to keep attention firmly focused in the actual sustainability report on truly relevant topics

and to use the website for providing further breakdowns or more detailed information for specific groups of stakeholders. This is also important to remember for the future when organizations will increasingly start to use their website as an alternative to publishing a hardcopy sustainability report.

Our survey shows that 35% of the surveyed reports contain more than 100 pages, with one report even counting as many as 205 pages. On average, in the reports reviewed, the number of pages was 89.

The outcome of our survey on the size of the reports is showed in the table below:

Number of pages in the report (including appendices)

Number of reports (Benchmark organizations)

1-25

25-50

50-75

75-100

> 100

Webbased

15%

25%

35%

15%

Deciding what to disclose: guidelines from GRI Many organizations follow the GRI framework when deciding what to include in their sustainability reports. The framework starts with a series of principles that organizations can use to judge whether a particular piece of information merits inclusion in their sustainability reports. The framework consists of principles for defining quality, content and the boundary of the sustainability report. The content principles are materiality, stakeholder inclusiveness, sustainability context, and completeness. Materiality — Information in the report should reflect the company’s most significant impacts to society and the environment. Material issues can be those that affect the organization’s financial position in the short term, but can also extend to factors with longer-term implications. Determining what is material

requires that the organization assess its “overall mission and competitive strategy, concerns expressed by stakeholders, broader social expectations, and the organization’s influence on upstream (e.g. supply chain) and downstream (e.g. customers) entities. “ Stakeholder inclusiveness — Reports should respond to stakeholders’ “reasonable expectations and interests.” In this context, stakeholders are any individuals or communities likely to be significantly affected by what the organization does, or whose actions are likely to affect the organization’s ability to carry out its business strategy and achieve its goals. Sustainability context — The purpose of a sustainability report is to show how an organization is helping to improve (or at

least halt the deterioration of) environmental, social and other conditions over the long term. Reporting on isolated or narrowly local instances of improvement fails to meet this objective. For example, an organization reporting on the benefits it provides to employees could put those benefits in context by presenting them “in relation to nationwide minimum and medium income levels and the capacity of social safety nets to absorb those in poverty or those living close to the poverty line.” Completeness — Reports should reflect significant impacts of its business and enable stakeholders to assess its performance in the reporting period. Source: GRI Sustainability Reporting Guidelines, Version 3.0, http://www. globalreporting.org/ReportingFramework/ G3Guidelines/

The financial sector from a non-financial perspective - The Path forward

5.4 Size of the reporting chapters We have made an analysis of the number of pages per chapter. Below, an overview is provided about the average number of pages per topic, however, there are significant differences between the surveyed institutions. Remarkable is that that a substantial amount of pages is on risk management and strategy which are often repetition from the annual report. Also, remarkable is that the amount of pages on environment and corporate citizenship is substantially higher than the amount of pages spent on areas which are seen as key for financial institutions as SRI/investment policy and stakeholder dialogue.

integrating the sustainability report with the annual report. There is a global trend toward integrating the sustainability report with the annual report. For example, as of June 2010, organizations listed on the Johannesburg Stock Exchange in South Africa must integrate their sustainability reports in their annual reports.7 Broader initiatives are also pushing financial standards in this area, such as the recently formed International Integrated Reporting Committee (IIRC). This group aims to create a globally accepted framework for accounting for sustainability that brings financial, environmental, social and governance information together. IIRC includes representatives from civil society

What is the average amount of pages per topic SRI/Investment policy

3,59

Customers

4,88

Suppliers

1,24

Stakeholders/Dialogue

3,88

Environment

8,00

Corporate citizenship/donation/Society

8,94

Employees Risk Management Strategy Others

5.5 Integrated reporting Our survey revealed that a lot of information in the sustainability report is taken over from the annual report. This results in extensive reports which are difficult to read and that lack focus. Not all intended readers of the sustainability report are interested in this type of information, just as not all intended readers of the annual report are interested in all the information in the sustainability report. This further stimulates a drive toward

7,24 15,88 8,94 15,76

and the corporate, accounting, securities, regulatory, NGO, Inter-Governmental Organization (IGO) and standard-setting sectors. Jim Turley, Chairman and Chief Executive Officer of Ernst & Young, is on the steering group of this committee. Sir David Tweedie, IASB Chairman and IIRC Steering Committee member, calls the group’s formation an “important step on that journey.”8 However, there are significant practical challenges in synchronizing timelines for

developing integrated reports. It may also mean that sustainability reports will need to include more quantification of traditionally qualitative measures, such as human rights and labor performance. Here, too, there are reasons for bringing in more sophisticated external advice: “As the reports become more integrated, they outgrow internal validation and boutique assurance firms.” Integrated reporting reflects how organizations are embedding sustainability into their company’s decision-making, governance, objectives and value chain, and how transparent they do this.

“The momentum is moving towards the integrated reporting model, which is music to my ears. What we are doing over the next year is trying to create the overall message to the G20. The overall message will be to ask the G20 to lend authority to a standard setter to start developing standards for integrated reporting. At the moment, we are starting to form the IIRC Establishing Steering Group – of which Ernst & Young’s Chairman and CEO, Jim Turley, is a member – and trying to make it easy for the G20 to say ‘yes, get on with it’. The overall concept is about integrated reporting.” Paul Druckman, Chairman of the Sustainability Policy Group of Fédération des Experts Comptables Européens (FEE), Chair of the Executive Board of The Prince of Wales’ Accounting for Sustainability Project.9

7 South Africa Chapter of the Institute of Directors, IoDSA King III Report, September 2009. Available at http://african.ipapercms.dk/IOD/KINGIII/kingiiireport/. 8 The Prince’s Accounting for Sustainability Project, “Press Release: Formation of the International Integrated Reporting Committee (IIRC), 2 August 2010. Available at http://i.globalreportingnews.org/ CmpDoc/2009/5873/0_press-release.pdf?dm_i=4J5,7KIL,J4006,J29X,1. 9 GRI 2010 Conference, Amsterdam, interview with Ernst & Young

The financial sector from a non-financial perspective - The Path forward

6 Significant KPI’s and disclosures

An organization’s sustainability report should at least contain a clear definition, vision and strategy relating to sustainability; this is necessary to be able to analyze whether the organization has achieved its targets over time and has made progress in its sustainability efforts. In order to ensure sufficient transparency, concrete objectives need to be formulated that are then translated into measurable key performance indicators (KPIs). This would seem a more challenging exercise for sustainability than for the more traditional types of reporting, such as financial reporting. For instance, how can an organization measure its progress in relation to health and safety? There tend to be no consistent definitions in this respect. That is why it is important that an organization should clearly indicate in its report what the scores (numbers and ratios) of the KPIs are based on. All of the studied reports are reporting on several performance indicators regarding their economic, social, environmental and sometimes even their governance indicators. Most of the organizations report their indicators for 2009 and also list the results of the last one or two years, permitting the stakeholders that will read the report to analyze and compare the performances of the entity. This possibility of comparability is very important.

Next important step for the financial organizations will be to classify these indicators whether they are Key performance indicators (KPI’s) or only Performance indicators (PI’s). The difference between KPI’s and PI’s comes out of the fact that the KPI’s are the indicators where the organizations will be basing their decisions on.

6.1 Facts about the key performance indicators The benchmark of the top 20 financial organizations shows how the organizations report on their performance indicators and their key performance indicators:

• Naming key performance Indicators and

performance indicators with a clear distinction. • Naming all the performance indicators without indicating if there is a difference between the performance indicators and the key performance indicators. • Naming some indicators throughout the report on several topics but with no indications if these are (key) indicators or just figures that might be interesting for the reader.

Facts and figures YES

Is the financial institution reporting on performance indicators?

Is the Financial institution reporting on its KPI’s?

Is the financial institution reporting on it targets / ambitions/ challenges for the coming years?

Is the financial institution reporting on specific targets regarding its KPI’s or PI’s?

The financial sector from a non-financial perspective - The Path forward

As shown in the table on page 19, all of the 20 financial institutions are reporting on performance indicators throughout the report. These indicators are mostly about the financial, social and environmental performances of the organizations:

are related to the financial situation of the company and social and environmental aspects. Key performance indicators linked to

Governance and communities/donations represent 15% of the total KPIs, letting 5% of the KPI linked to suppliers, customers and other types or KPIs.

I How many organizations did publish KPIs regarding the following topic:

• Financial: key financial data for the organizations • Social: data concerning the employees of the organizations • Environmental: data concerning the environmental impact of the organizations • Some organizations also report on the indicators linked to their governance (indicators related to the internal audits, board members…). However, even if 100% of the studied organizations reported performance indicators, 8 did not publish information about their key performance indicators or stating which of these indicators where key for them. 12 organizations reported on their key performance indicators. Some of them named these KPI’s but organizations can also choose to name them in a slightly different way such as “main indicators”, “key facts, ‘key figures”. A breakdown can also be made between the types of KPI’s that organizations are reporting on, see table I.

KPI Financial

KPI Social

KPI Environmental

KPI Communities and donations

KPI Governance

KPI Suppliers

KPI Customers

KPI Other

Amount of institutions publishing KPI’s

II Within the 12 reports that published KPIs, how many KPI’s were related to Nbr. of KPIs KPI’s Financial

25%

KPI Social

21%

KPI Environmental

28%

KPI Communities and donations

KPI Governance

KPI Customers

KPI Suppliers

KPI Other

310

100%

total

III What is the average number of KPI’s institutions do have per topic (if they report about them)?

By looking at table I, it can be concluded that the most important KPIs for financial institutions are linked to financial, social and environmental aspects suggesting that the most important stakeholders for the entities are shareholders, employees and NGO’s with a focus on the environment. These statements are also emphasized by the amount of KPIs published by the financial organizations per topic. As seen in table II about 75% of the KPIs

Nbr. of KPIs KPI Financial

KPI Social

KPI Environmental

KPI Communities and donations KPI Governance

5 10

KPI Suppliers

KPI Customers

KPI Other Average amount of KPIs reported by organizations

The financial sector from a non-financial perspective - The Path forward

3 26

By analyzing the KPIs’s of the financial institutions, we also analyzed the amount of KPI’s per topic that organizations where defining as “Key”. The average amount of key performance indicators organizations are reporting on is 26. (See table III on page 20) It can be noticed that some organizations define some “mandatory” performance indicators as key and also an organization sometimes breakdown the main item in several key performance indicators. One example is around diversity. Diversity could be only the percentage of women in the company but sometimes, an organization also reports also the net amount of men/women and then the percentage of men and of women as being key performance indicators which results in four key performance indicators. These conclusions can also be seen in the presentation of the indicators per theme in table I on this page.

6.2 Financial key performance indicators Out of the 12 reviewed reports, 10 reports published key performance indicators linked to their financial results in the sustainability report. In total the 10 reports published 76 KPIs. These key performance indicators can be divided in four types of indicators (table I) As shown in the table, most of the key performance indicators are directly linked to the financial results of the organizations and therefore often directly taken off the annual report. These KPIs represent 75% of the total population of the financial key performance indicators. The other type of key performance indicators of the organizations are mainly linked to the sustainable responsible investments (SRI)

I Within the 10 reports that published financial KPIs, how many financial KPI’s were related to: Nbr.of KPIs Overall financial results (usually also published in the annual report)

75%

Equator principles

SRI

Other types of KPI (investments, Eco projects/ credits…)

100%

II Within the KPI’s linked to the overall financial results what were the 5 topics the most used: Amount of organizations Nbr. of KPIs reporting about the kpi’s KPI’s related to “Equity and or return on equity”

KPI’s related to “Earnings per share and/or dividend”

KPI’s related to “Revenues / sales”

KPI’s related to the “balance sheet value”

KPI’s related to the “capitalization value”

and the equator principles projects. More information about these two aspects will be given in chapter 7 of this report. In order to have more insight in the type of key performance indicators directly linked to the financial results, we classified them in different categories. The five topics that were the most used are presented in table II.

the KPIs set up for their sustainable performances or that will be showing the performances of the financial institutions regarding their sustainability policy or strategy.

The five categories presented in the above table represent almost 50% of the types of KPIs presented by the organizations and directly linked to their financial performances. However, some organizations have one or more KPIs related to one specific financial topic. For instance, in total there are 5 KPIs linked to the revenues or the sales for 3 of the organizations. These types of key performance indicators “directly linked to the financial results” are also the KPIs of the annual report and not

The financial sector from a non-financial perspective - The Path forward

6.3 Social key performance indicators

I Within the 10 reports that published social KPIs, how many social KPI’s were related to:

The average number of social key performance indicators, for the 10 reports reporting on their social KPIs, is 7. This is an important amount for key indicators related to one item but as explained, organizations tend to sub-divide their KPI’s into “sub KPI’s”. In the table relating the amount of KPIs to the number of organizations, this conclusion will be shown more explicitely.

KPI’s related to “amounts of Headcounts / FTE”

32%

KPI’s related to “diversity”

29%

KPI’s related to “turnover”

11%

KPI’s related to “trainings”

11%

KPI’s related to “health and safety information”

KPI’s related to “satisfaction of employees”

KPI’s related to other aspect of social information

100%

In table I, it can be seen that most of the social key performance indicators are linked to the total of employees, diversity and turnover ratios and amount of trainings.

II What are the types of KPI’s used regarding the amounts of headcounts /FTE: Nbr. of KPIs

Nbr. of organizations

KPI’s indicating the overall amount of FTE’s/ Headcounts

Often financial organizations publish several social key performance indicators linked to the same topic such as one KPI representing the total amount FTE’s and then the total amount of FTE’s subdivided per contract and/or region. This is shown in table III.

KPI’s indicating the amount of FTE’s / headcounts divided by types of contracts

KPI’s indicating the amount of FTE’s / Headcounts divided by region

Key performance indicators linked to diversity are mainly showing ratios or figures linked to male / female break-downs for the whole company and/ or top management or split down by region.

III What are the types of KPI’s used regarding diversity:

Nbr. of KPIs KPI’s indicating the overall percentage and/or amount of male / female

KPI’s indicating the percentage and/or amount of male / female in management positions

KPI’s indicating the percentage and/or amount of male/female split up by region

KPI’s indicating the percentage and / or amount of disabled people within the company

Nbr. of organizations

The financial sector from a non-financial perspective - The Path forward

6.4 Environmental key performance indicators

I Within the 10 reports that published environmental KPIs, how many KPI’s were related to:

Out of the 12 sustainability reports reporting key performance indicators, 10 organizations reported key performance indicators related to their environmental performances. On average, the 10 organizations reported 9 KPIs on the topic. The review shows that most of the environmental KPIs were related to the amount of CO2 emissions, business travel (and their impact) and the water consumption of the entities (table I).

KPI’s related to the amount of CO2 emissions

29%

KPI’s related to business travels

17%

KPI’s related to water consumption

10%

KPI’s related to energy consumption

10%

KPI’s related to waste produced by the organisation

KPI’s related to paper consumption

KPI’s related to recycling activities

KPI’s related to the use of renewable energies

KPI’s related to the consumption of electricity

KPI’s related to other environmental themes

100%

Because of the importance of the KPI’s used regarding the CO2emissions (almost 30%), the review of the reports also included an analysis of the KPI’s specificly linked to the CO2 emissions of the financial institutions. This analysis is a good example of the fact that organizations often have several KPIs linked to the same subject.

Nbr. of KPIs

II What are the types of KPI’s used regarding CO2 emissions: Nbr. of KPIs

Nbr of organizations

KPI’s indicating / linked the amount of CO2 emissions per employee

KPI’s indicating / linked the amount of CO2 emissions per greenhouse gas protocol scope

KPI’s indicating / linked the total CO2 emissions for the company

KPI’s indicating / linked the amount of CO2 emissions per type of activities

The financial sector from a non-financial perspective - The Path forward

6.5 Other types of key performance indicators Nevertheless, financial institutions also report on other key performance indicators such as communities/donations, customers and supplier relationships and governance. Six organizations reported KPIs regarding their customers relationships and their donations to the community. Communities and donations key performance indicators Most of the KPIs linked to the communities and donations are about amounts spend on donations and voluntaring time spent by employees. However, it can be said that most of the organizations reporting on these KPIs are reporting on several KPIs about this topic since the 6 organizations in total published 29 KPIs in their reports. Key performance indicators in relation to customers Customers are one of the most important stakeholder groups for financial institutions. Six of the twenty reports reviewed published KPIs about their customers. This represents in total 17 KPIs of which 24% are linked to the number of customers, 35% are linked to satisfaction rates and rankings in client satisfaction surveys and 12% are about complaints received.

Within the 6 reports that published KPIs linked to communities and donations, how many KPI’s were related to: Nbr. Of KPIs KPI’s related to the amount of donations / sponsorhips

66%

KPI’s related to the amount time spent by employees for volunteering work

24%

Other types of KPI’s linked to Communities and donations

10%

Within the 6 reports that published KPIs linked to customers, how many KPI’s were related to Nbr. Of KPIs KPI’s related to the number of customers

24%

KPI’s related to rankings and satisfactions rates

35%

KPI’s related to complaints

12%

Other types of KPI’s linked to customers

29%

100%

Some KPIs are linked to other “customer topics” which shows that KPIs can varie a lot between organizations and that customer relationship aspects can be different for banks and insurance organizations.

their supplier relationships (mostly supplier satisfactions and supplier sustainable code of conducts information) and 2 organizations reported their positions or ratings in several sustainability rankings (as Dow Jones Sustainability Index –DJSI or Sustainability Asset Management SAM).

Finally, 2 organizations reported on governance KPIs (mainly linked to information about CR Comittees, board of directors), 3 organizations on KPIs linked to

The financial sector from a non-financial perspective - The Path forward

7 Socially responsible investments and equator principles

Stakeholders often challenge financial institutions on their strategy in respect of Socially Responsible Investments (SRI), and their Project Finance projects. These topics can be linked with the core sustainability strategy of financial institutions given the fact that these activities are veryÂ sensitive and related to reputational risks. Financial institutions are often in the headlines in respect of their investments in organizations who have a controversial strategy relating to Economic Social and Governance (ESG). This attention for responsible investments, financing and lending by financial institutions is also shown in the number of financial institutions signing up for international guidelines such as the Equator principles, European SRI Transparency and United Nations Principles for Responsible investment (UNPRI). Signing up means at least the intention of applying the principles set by these international initiatives. Major steps have been taken by the financial institutions in the last few years to become more transparent about their investments and Project Finance. From the financial institutions in our benchmark, 13 report on their responsible investments and from the banks, 16 report on their responsible financing following the equator principles.

However, it is remarkable that only 4 financial institutions are only considering SRI funds as KPI. For the Equator principles, the number of KPIs is even lower with 3 institutions reporting. The transparency of disclosure is also rather limited. Financial institutions often report on the fact that they are adopters of the Equator principles, European SRI Transparency guidelines and the UNPRI. However, cases are rare where organizations are reporting on the governance, strategy or dilemmas linked with these memberships. Financial institutions are often reporting only on a narrative basis on this, explaining what the concept of Socially Responsible Investments or the Equator Principles contains in general. However, there is very little disclosure in respect of the Equator principles, the amount of rejected projects, how the assessment is made on the classification of these projects or the stakeholder strategy. For SRI funds, itÂ is generally not clear if institutions have a group strategy on SRI which is aligned and implemented within the whole group, which are the criteria for the set up of their SRIfunds and the scope of the Social Responsible Investments. Financial institutions are rarely disclosing the amount of their Sustainable Assets Under Management and almost no institution is reporting on targets on SRIs orÂ Equator Principles.

Is the financial institution reporting on the SRI funds (quantitative information)? Is the financial institution reporting on its equator principles projects?

The financial sector from a non-financial perspective - The Path forward

KPI

The Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing. The EPs are considered the financial industry â&#x20AC;&#x2DC;gold standardâ&#x20AC;&#x2122; for sustainable project finance. The EPs, based on the International Finance Corporation (IFC) performance standards on social and environmental sustainability (http://www.ifc.org/ifcext/ sustainability.nsf/Content/ PerformanceStandards), and on the World Bank Groupâ&#x20AC;&#x2122;s Environmental, Health and Safety general guidelines (http://www.ifc. org/ifcext/sustainability.nsf/Content/ EnvironmentalGuidelines), are intended to serve as a common baseline and framework for the implementation by each adopting institution of its own internal social and environmental policies, procedures and standards related to its project financing activities.

Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures that implement the EPs. The EPs apply to all new project financings globally with total project capital costs of US$ 10 million or more, and across all industry sectors. In addition, while the EPs are not intended to be applied retroactively, EPFIs will apply them to all project financings covering expansion or upgrade of an existing facility where changes in scale or scope may create significant environmental and/or social impacts, or significantly change the nature or degree of an existing impact. The EPs also extend to project finance advisory activities. In these cases, EPFIs commit to make the clients aware of the content, application and benefits of

applying the Principles to the anticipated project, and request that the client communicate to the EPFI its intention to adhere to the requirements of the EPs when subsequently seeking financing. The adopting EPFIs view the EPs as a financial industry benchmark for developing individual, internal social and environmental policies, procedures and practices. As with all internal policies, these Principles do not create any rights in, or liability to, any person, public or private. Institutions are adopting and implementing the EPs voluntarily and independently, without reliance on or recourse to the International Finance Corporation or the World Bank. Currently, there are 69 official adopters of the Equator Principles. Source: www.equator-principles.com

The financial sector from a non-financial perspective - The Path forward

8 Disclosure on management approach

The first order of business is governance. Far from something that can be delegated to middle managers, sustainability reporting is a mandate that needs senior management level support. A corporate governance structure with clear reporting lines helps establish the requisite backing from senior leadership and provides accountability at the operational level. Some organizations link sustainability performance to executive compensation, a step likely to sharpen organizational focus on the issue. An organization needs to embed sustainability in order to achieve a truly sustainable performance. The level to which sustainability has been embedded in the organization is reflected, for instance, in how stakeholder management has been rolled out and in the attention that is being paid to the sustainability report.

8.1 Governance structure Disclosures on the governance structure of sustainability should address how the duties, responsibilities and powers relating to sustainability aspects have been assigned in the organization. This might involve persons, positions and ranks, committees and departments. It provides an understanding of how sustainability has been anchored in the organization.

Our survey shows that only 12 of the reviewed reports contain disclosures on the governance structure. In 9 of these, disclosures are limited. 8 reports do not include any disclosures on the governance structure. The reported information on CSR governance of financial institutions is limited. Most commonly it is said that the CEO, CSR Committee and/or CSR departments are responsible for CSR but without more information on what their roles are. Some best practices illustrate this type of information about how the governance structure is set up (for instance by means of an organization chart) but only few of them are giving more information such as:

• The link between the CSR performance

and remuneration; • The roles and duties of each department involved in the CSR management; • Responsibilities and targets of involved employees / departments.

Is information provided on the governance structure regarding CSR? a) Yes, detailed information is provided about the tasks and responsibilities regarding CSR (per country unit). The responsible in the Board is mentioned

15%

b) The information about the tasks and responsibilities is limited.

45%

c) No, no (or hardly any) information is provided on the tasks and responsibilities regarding CSR. Only the responsible board member is mentioned

40%

100%

Total

The financial sector from a non-financial perspective - The Path forward

8.2 Person bearing ultimate responsibility for sustainability and executive compensation Articulating sustainability goals externally, and providing incentives to business units, helps embed the sustainability mission. There are different views on whether to link sustainability goals into an individual’s salary package. Some organizations embedded sustainability performance in top management’s compensation. For example, 20% of Royal Dutch Shell management remuneration is tied to sustainable development goals.10 AzkoNobel ties 50% of

management compensation to the Company’s ranking in the Dow Jones Sustainability Index11. An alternative approach is to change behaviors by celebrating the achievements of some managers or businesses, and holding poor performers to account. Our benchmark revealed that only 3 financial institutions are indicating that the executive compensation is linked to the sustainability targets, with 1 institution revealing that they have plans for the future. 16 financial institutions are not disclosing any linkage between executive compensation and achievement of sustainability targets.

Does the report indicate whether executive compensation has been linked to (achievement of) sustainability targets? a) Yes

15%

b) No

80%

c) Plans for the future are disclosed

Total

100%

10 Royal Dutch Shell, “Royal Dutch Shell PLC Sustainability Review 2009,” page 1. Available at http://sustainabilityreport.shell.com/2009/servicepages/downloads/files/sd_review_shell_sr09.pdf. 11 Azko Nobel, “Azko Nobel Remuneration Report 2009: Performance Share Plan,” Available at http://report.akzonobel.com/2009/governancecompliance/remunerationreport/performanceshareplan.html?cat=b.

The financial sector from a non-financial perspective - The Path forward

9 Concluding comments

9.1 Increased importance of sustainability reporting and assurance in the financial industry sector Sustainability reporting in the financial industry sector is becoming mainstream, given the fact that all financial institutions we reviewed are publishing a sustainability report, of which 75% of the reports are using the GRI guidelines and the same percentage includes external verification of their sustainability report. However, there is still room for improvement in the quality of the reports. The next step is that financial institutions truly integrate sustainability in their business strategy. This will further stimulate a drive towards integrating the sustainability report and the annual report.

Most of the time, financial institutions are reporting on key performance indicators linked to financial, environmental and social indicators. These KPIs are often not directly linked to the major sustainable performances of the institutions but on minor impacts as for instance waste or water consumption. The core message of how sustainability is embedded in the organisation is difficult to extrapolate in a number of instances. Organisations are aware of the importance and scope of sustainability, but prove to struggle with truly owning it. More focus on the relevance of the different sustainability topics to the organisation could contribute to improving this situation.

9.3 Stakeholder dialogue is missing 9.2 The sustainability reports of the Financial Institutions are not dealing with the most material topics relevant for their sector Only 10 % of the reviewed reports have a materiality matrix and only 10 % are describing on a narrative basis their materiality approach. You would not expect financial institutions to focus so much on environmental KPIs, but rather on access to capital, equator principles and SRI funds. Probably, this is linked to the fact that sustainability is not yet fully embedded in the organizations. It can be concluded from the benchmark that too much emphasis is still being placed on completeness in sustainability reports in the sense of including all topics, without any focus. The sustainability reports are not wellbalanced. They tend to contain a plethora of positive messages whilst the true dilemmas facing the organisation are often left too vague or not explained at all.

As far as stakeholder management is concerned, the sustainability reports do not explicitly indicate what approach they have chosen and who exactly are considered the organisationâ&#x20AC;&#x2122;s stakeholders to be. The reports imply that organisations consider everyone a stakeholder, which is impossible from a practical perspective. Every organisation is forced to make choices between different â&#x20AC;&#x201C; and often conflicting â&#x20AC;&#x201C; interests.

9.4 Little disclosure on SRI funds or Equator Principles As mentioned earlier, you would expect that sustainability reports of financial institutions would report extensively on their approach to Sustainable responsible investments or Equator Principles. This assumption is driven by the fact that more and more stakeholders are questioning institutions on these topics and a huge reputation risk is linked to it.

The financial sector from a non-financial perspective - The Path forward

9.5 Unnecessary repetition of financial KPIs and subdividing of KPIs Our benchmark also revealed that 75% of the KPIs in the sustainability reports are related to the financial situation of the company and social and environmental aspects. Also, a lot of KPIs in the sustainability report are copied from the annual report. This results in extensive reports which are difficult to read and that lack focus. Out of the review, it can also be concluded that most of the time financial institutions have several KPIs for the same topic and sub-topics which can be confusing for the reader and could be improved by selecting only one KPI. For instance for diversity, the KPI could be the percentage of women in the senior management positions and the information about the headcounts of male / female within the different positions could be named as being performance indicators used to calculate the key performance indicators.

9.6 Little disclosure on CSR governance and executive remuneration The success of any enterprise wide strategy usually depends on a clearly defined governance structure and effective leadership. A strong governance framework with senior executive support from central and functional areas through a steering committee will be important in finding the appropriate balance between central controls and timely local responsiveness. Strong governance can also

help balance effective risk management and the enduring need for innovation, as well as the cost of sustainability responses (eg reputational risk) versus the potential value that can be unlocked by identifying and investing in opportunities. Key elements for effective governance include: • A board-level sustainability strategy committee operating effectively with clear responsibility • External stakeholder engagement to respond to increasing demands for transparency in reporting • Robust processes to identify risks to business objectives and a timely and appropriate risk management response • Focused policies and procedures that respond to these risks • Clear communication from the CEO to all employees regarding the risks, opportunities, strategies and goals • An appropriate system of delegated authorities at each level of the organization • A proven system of internal control reporting through to the CEO/CFO, linking non-financial data to the financial systems • KPIs to benchmark performance and accountability against goals; programs to recognize achievement and to reward through performance-based compensation • An effective process for reporting and disclosure, and broader stakeholder communications

The financial sector from a non-financial perspective - The Path forward

Appendices: list of reports of organizations used in the benchmark

TOP 20 European Financial Institutions 1) BNP Parisbas SA 2) Royal Bank of Scotland Group plc 3) HSBC Holdings plc 4) Credit Agricole SA 5) Barclays plc 6) Deutsche Bank AG 7) ING Groep N.V. 8) Lloyds banking Group plc 9) Banco Santander SA 10) Société Generale SA 11) UniCredit spA 12) UBS AG 13) Commerzbank AG 14) AXA 15) Credit Suisse Group AG 16) Intesa Sanpaolo SpA 17) Allianz SA 18) Confederation nationale du Credit Mutuel 19) Dexia SA 20) Banco Bilbao Vizcaya Argentaria SA

The financial sector from a non-financial perspective - The Path forward

Appendices: Glossary

European SRI – European Sustainable Responsible investments – www.eurosif.org GRI: Global reporting initiative - http://www.globalreporting.org IFAC – International Federation of Accountant – www.ifac.org IIASB – International Accounting Standard Board – www.ifrs.org UNCTAD – United Nations Conference on Trade and Development - www.unctad.org

AA1000 Standard: The AA1000 Assurance Standard is a generally applicable standard for assessing, attesting to, and strengthening the credibility and quality of organizations’ sustainability Reporting, and their underlying processes, systems and competencies. It provides guidance on key elements of the Assurance process

the evolving phase. Some SRI investors refer only to the SEE risks while others refer to ESG issues (Environmental, Social, Governance). SRI is based on a growing awareness among investors, organizations and governments about the impact that these risks may have on long-term issues ranging from sustainable development to long-term corporate performance.

SRI (Social responsible investment): Socially Responsible Investment (SRI) combines investors’ financial objectives with their concerns about social, environmental, ethical (SEE) and corporate governance issues. SRI is an evolving movement and even the terminology is still very much in

Project finance Project finance is the long term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors

The financial sector from a non-financial perspective - The Path forward

Who to contact

The Netherlands Dick de Waard RA MA Partner / Leader Climate Change and Sustainability Services Belgium and the Netherlands dick.de.waard@nl.ey.com • + 31 (0)88-407 27 33

The Netherlands Rob Steensels Manager Financial Accounting and Advisory Services / Financial Services Organization rob.steensels@nl.ey.com • +31 (0)88-407 18 75

Belgium Harry Everaerts Partner harry.everaerst@be.ey.com • + 32 (0)2 774 9434

The financial sector from a non-financial perspective - The Path forward

Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com For Belgium Ernst & Young refers to the activities offered by Ernst & Young Bedrijfsrevisoren/Réviseurs d’Entreprises BCVBA/SCCRL, Ernst & Young Tax Consultants BCVBA/SCCRL, Ernst & Young Accountants BCVBA/SCCRL, Ernst & Young Special Business Services BCVBA/SCCRL or their respective associated companies in Belgium, each of which is a separate legal entity and have their registered offices at De Kleetlaan 2, 1831 Diegem, Belgium. For the Netherlands Ernst & Young refers to the activities of Ernst & Young Accountants LLP, Ernst & Young Belastingadviseurs LLP and other Ernst & Young entities in the Netherlands. Ernst & Young Accountants LLP (Chamber of Commerce 24432944, Registrar of Companies for England and Wales OC335594) and Ernst & Young Belastingadviseurs LLP (Chamber of Commerce 24432939, Registrar of Companies for England and Wales OC335596) are limited liability partnerships incorporated under the laws of England and Wales, with their registered office at Lambeth Palace Road 1, London SE1 7EU, United Kingdom and principal place of business at Boompjes 258, 3011 XZ Rotterdam, the Netherlands. © 2011 EYGM Limited. All Rights Reserved. 110025 This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.