It's every corporation's nightmare: a throng of rowdy activists gathers outside company buildings to demonstrate against alleged environmental and human-rights abuses. That was the scene in New York City and Chicago last month as dozens of people in white haz-mat suits converged on the offices of JPMorgan Chase to protest what they claimed was the bank's underwriting of illegal logging in Indonesia and human-rights abuses tied to a Chase-funded mining operation in Peru. Oil companies and industrial giants may be accustomed to such treatment, but not JPMorgan Chase, the second largest bank in the U.S. Two weeks later, the company announced that it would introduce policies to promote sustainable forestry and indigenous people's rights and would block funding that could be used for illegal logging. It also promised to reduce its carbon emissions and those of its clients. Chalk up another victory for environmentally and socially responsible finance.
Ten years ago, big private banks were not featured on environmentalists' hit lists. Activists focused on large corporate polluters in the oil and timber industries. Over time, though, green groups have realized that one effective way to halt destructive practices is to take on the institutions that bankroll them. "The private financial sector more than any other has the ability to begin the ecological U-turn modern society so desperately needs," says Ilyse Hogue, director of the global-finance campaign at Rainforest Action Network (RAN), which led the fight against JPMorgan Chase. Yet even as they have publicly confronted big financial institutions, green groups--many of which belong to a loose collection of nongovernmental organizations (NGOs) known as BankTrack--have privately collaborated with banks to jointly tackle environmental and social concerns.
The direct action and dialogue are paying off as banks begin to set green goals. HSBC has promised to cut carbon emissions, while Bank of America has pledged to shun investments in logging operations in the world's most sensitive forests. Even more important is the introduction of new industry standards, such as the Equator Principles, which "promote responsible environmental stewardship and socially responsible development" by evaluating the threats that projects pose to forests, natural habitats and indigenous populations.
Thirty major private banks, including U.S. giants Citigroup, JPMorgan Chase and Bank of America, and European powerhouses ABN Amro, Barclays, HSBC and ING, have so far signed on to the principles. The guidelines cover some 80% of the global-project-financing market, according to Jon Williams, head of sustainability risk management at HSBC. "Everyone is interested in the balance between sustainability and economic development," says Williams. "We believe you can do well and do good."