ESG

ESG
A Blueprint for our Business

Interview with

Fiona Melrose

Head of Group Strategy & ESG

What does ESG mean to UniCredit?

At UniCredit, ESG is not a set of factors or considerations. It is a way of doing business and fundamental to every action we undertake. It is not a retrospective consideration only after we have made a business decision; ESG implications are innately woven into our approach and fully integrated in the decision-making process. The UniCredit mindset and culture is about doing things the right way and ESG is central to that.

OUR ESG STRATEGY: BUILDING ON STRONG FUNDAMENTALS TO DELIVER VALUE

Our ESG strategy: building on strong fundamentals to deliver value

How do you make sure this is maintained throughout your business?

We have established a set of principles which underpin all aspects of ESG to ensure the pillars of Environmental, Social and Corporate Governance remain core to our work across the business. These are:

  • We will hold ourselves to the highest possible standards so that we do the right thing by our clients and society;
  • We are totally committed to supporting our clients in a just and fair transition;
  • We will reflect and respect the views of our stakeholders in our business and decision-making process.
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OUR ESG PRINCIPLES AND BELIEFS

These policies are integral to every part of our business and will act as a lens through which we view all activity. Our ESG policies are not a separate division: they shape how UniCredit operates at every level. This includes actions we take within our own organisation, such as managing our carbon footprint and supporting our people to work together to win, as well as the communities we support and what we expect of those we choose to partner with. Having concrete policies like these that apply to every area of our business will ensure we hold ourselves accountable.

That sounds simple. Is it?

Having clearly defined principles provides us with a clear framework to simplify the decision-making process. For example, UniCredit Unlocked announced our plan to deliver €150 bn in ESG finance in the form of lending, DCM and investments by 2024.

OUR ESG GOALS AND TARGETS

Our ESG goals and targets

In 2021 we enhanced our Coal and Oil & Gas policies, supporting the financing of green activities for those companies actively engaged in a phase out of coal and aligned with their national energy plans and an updated policy that prohibits financing of all unconventional activities, all Arctic activities and the financing of new explorations of oil and the expansion of oil reserves. We also signed the Tobacco Free Finance Pledge and the UNEP-FI commitment to financial health and inclusion in 2021 amongst others. All of these actions were taken because they align with our fundamental principles and are best-in-class, which is what we strive for across all ESG components. Of course, any corporate or global transition is complex. Particularly when ESG is seen as one single consideration, rather than a vast array of different – and sometimes conflicting – priorities.

SECTOR POLICIES

UniCredit has adopted detailed special policies regarding sectors that present significant environmental and social risks and monitors portfolio exposures to them accordingly.A

Sector policies

We intend to review and, if necessary, set up policies in other sensitive ESG sectors. This will be done on the basis of our portfolio analysis and with the support of scientific experts in order to address such topics from a factual and impact-based perspective.

A. Refer to the Supplement - Risk Management section or to Sustainability on our corporate website for more information.

How do you manage that?

Firstly, we are pragmatic in acknowledging that the journey to a sustainable future is not a simple one. We know that compromises are required between competing aspects of ESG priorities. While we are equally committed to each pillar of E, S and G, we also know that fulfilling certain obligations will come at a detrimental effect to others. This is particularly true in relation to environmental and social factors. For example, there are certain countries and industries less far along in the green transition than others.
We know that way to a sustainable future is not to discount these sectors or abandon them in this process. Rather, we intend to support them and their stakeholders in a just and fair transition. This is the right thing to do. This is part of our social responsibility and not doing so would fundamentally be forgetting the ‘S’ pillar.

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KEY STRATEGIC ACTION ACROSS 4 BUILDING BLOCKS

What does it mean to fulfil your social responsibilities?

The social implications of our actions are often less quantifiable and more difficult to measure than environmental ones, but this is no reason to neglect them. We place particular emphasis on our social responsibilities because our role and position, as a pan-European bank, means we have a critical role to play in supporting communities across the continent.

Our Social Impact Banking business is working to build a fairer and more inclusive society by identifying, financing and promoting initiatives that have a positive social impact. In 2021, our Social Impact Banking has €0.4bn stock of loans in microcredit and impact financing and reached 3.7m people who were direct and indirect beneficiaries of social financing. Now we intend to go further, targeting a cumulated volume of €10bn in 2022-2024. This will involve improving access to our offering for vulnerable people and supporting companies and investments that will help achieve the social Sustainable Development Goals as defined by the United Nations.

Social responsibility goes beyond finance. UniCredit’s purpose is to empower communities to progress, which means supporting people in all aspects of their lives via our own contribution to society. The UniCredit Foundation plays a critical role here, disbursing c.€7 million in 2021, €2.78m of which supported support organizations committed to fighting hunger post Covid-19. We operate a number of financial and ESG awareness initiatives which reached more than 206,000 beneficiaries in 2021, as well as giving over €20m for c.350 scholarships and fellowships to more than 1,000 students and researchers.

This role goes beyond finance: UniCredit has a long tradition of sustaining culture, in particular art and music. Recently we announced a new strategy to leverage and enhance our artistic heritage with a focus on increasing access to our collections, including loaning our works out and providing virtual access to them.

How will you measure progress?

There are some key milestones which we are working towards. This year we joined the Net-Zero Banking Alliance, committing to achieve Net Zero emissions from our operations by 2030 and from our financing portfolio by 2050.

ENVIRONMENTAL FOOTPRINT

Environmental footprint

In 2021 we reduced our direct CO2 emissions by 32% compared to 2017 and are targeting no single-use plastic items in our buildings by the end of 2022. The ECB’s climate risk stress test in 2022, will be an important moment in our collective journey to a greener future, and we are committed to working with regulators to meet these mutual goals.

We are also one of the few banking groups in Europe to have a dedicated ESG Committee, created in April 2021. The committee’s role is to supervise all our ESG activities and will ensure we are held accountable. This will also be the case with regards to our Governance and we will maintain strict respect of the UN Principles for Responsible Banking. We’re proud of our Diversity & Inclusion efforts: 46% of our Board, 40% of our GEC and 33% of our senior leadership are female, and we recently announced our investment of €100m to close the gender pay gap over the next three years, ensuring equal pay for equal jobs.

Why is UniCredit uniquely able to make a difference in this space?

We believe that our role is to facilitate growth, innovation, and development the right way. This means limiting the negative consequences for all stakeholders and securing growth for the long term. I believe that UniCredit’s unparalleled positioning across Europe can enable us to play a critical role in our whole continent’s transition to a more sustainable future. We do not want to support the green transition; we want to lead it. That is why we established our Sustainable Finance Advisory team to accelerate clients in their journey.

DEEP-DIVE

DEDICATED ESG ADVISORY MODEL TO STRENGTHEN DISTINCTIVE VALUE PROPOSITION

What can we expect from UniCredit in this space in the future?

I am determined that we see ESG as an opportunity rather than a rulebook.
Financially, the potential is clear: there is an estimated €2tn per year additional global net financing opportunities for banks if we are to achieve 1.5°C pathway by 2050.

But the financial upside is just one aspect of the ESG opportunity. At UniCredit we know that good ESG means more than financial growth; it equates to progress, in all aspects of life, for the clients and communities we serve. This belief will govern how we do business. It will enable us to not only improve the financial circumstances of our bank and the communities and clients we serve, but to fuel the progress of communities across Europe.

Sustainable Approach in Our Premises

At UniCredit, ESG is at the heart of everything that we do. Our sustainable approach to business ensures that our work has a positive impact on, and secures the future of, our communities and planet.

Our commitment to sustainability is reflected by our ongoing Green Real Estate initiative which focuses on reducing our CO2 footprint to build a greener tomorrow.

Over the past several years, we have run a series of Energy Management initiatives with the ambition of reducing energy consumption and waste across our premises. Across 1,100 branches in Italy and in Russia we have continued to modernise our buildings by installing remote HVAC and lighting management systems at our head offices.
We have also implemented lighting optimisation projects in Italy, Germany, Bulgaria, Bosnia, and Herzegovina, Romania, and Slovenia.

We are committed to using green energy procurement to guarantee that our total electricity consumption comes from a renewable source. We have already achieved this by 79% in Italy, Germany, and Austria. Additionally, we have and will continue to invest in making our data centres more energy efficient with a special focus on Power Usage Efficiency.

Sustainable Approach in Our Premises

At UniCredit, we believe in the power of our industry and in the good it can do when functioning correctly.

This goes far beyond our offices and branches. We work in a way that will benefit all our stakeholders, including the world around us. That’s why we enhanced our target to remove all single-use plastic items from our premises by the end of 2022 and we continue to educate our employees on waste management.

Finally, our ongoing Mobility Initiatives have also been adopted by our people across all of our European branches.
In 2021, we installed bike stations in our buildings in Bulgaria, Russia, and Italy and recharging stations for electric vehicles were installed in Italy, Austria, and Germany.

We know that our commitment to sustainability and actions to support the environment expand well beyond our local communities. As a pan-European bank with over 15 million clients and 87,000 employees across the world, collectively, we truly believe that our local impact can make a global difference.

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