Nedbank ESG Due Diligence

7/31/2019 Nedbank ESG Due Diligence

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IVAN DIAZ

16360613

[email protected]

0826529423

SUBJECT: BUSINESS ENVIRONMENT

Number of pages: 11

Due date: 30TH

July 20112

Group: MBA Modular E1 2010

Lecturer: Jako Volschenk, Arnold Smit

Office use only: Date received:


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Table of contents iiList of tables ivList of figures vList of appendices viList of acronyms and abbreviations vii1 NEDBANK GROUP INDUSTRY AND CORE BUSINESS 11.1 SUSTAINABILITY TRENDS IN THE BANKING SECTOR 22 ESG NEDBANKS DUE DILIGENCE 33 GENERIC TYPES OF COMPETITIVE ENVIRONMENTAL STRATEGIES FRAMEWORK 54 CONCLUSION AND RECOMMENDATIONS 105 REFERENCES 12


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Table 2.1: Big Four Corporate and Social Responsibility (CSR) assessment 4Table 2.2: Nedbank Equator Principle Deals 2007-2011 5Table 3.1: Nedbank Sustainability Cost-Benefit summary 8Table A.1: ESG DD Questionnaire 14


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Figure 1.1: Nedbank Historic timeline. 1

Figure 2.1: UNGC Issue Area Coverage Nedbank 2012 (Self assessment). 4

Figure 3.1: Generic Competitive Environmental Strategies. 7Figure 3.2: Nedbank Sustainable Value Framework. 9


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APPENDIX A ESG NEDBANK due diligence based on cdc group TOolkit 14

APPENDIX B Nedbank SUSTAINABILITY AND GOVERNANCE INITIATIVES 18


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AA1000APS AccountAbilitys Principle Standards

CDC Commonwealth Development Corporation UK

CDM Clean Development Mechanism ProjectsCDP Carbon Disclosure Project

CES Competitive Environmental Strategy

CSI Corporate Social Investment

CSR Corporate Social Responsibility

DFI Development Finance Institutions

EP Equator Principles

ESG environmental, social and governance matters

GHG greenhouse gas

GRI Global Reporting Initiative

ILO International Labour Organisation

IFC International Finance Corporation

IRC Integrated Reporting Committee

IIRC International Integrated Reporting Committee

ISO International Standard Organisation

KPIs Key Performance Indicators

MDB Multilateral Development Banks

NGOs non-governmental organisations

PFMA Public Finance Management Act

RED Record of Employees Dismissed for dishonesty

SA South Africa

SEMS Social and Environmental Management System

UN PRI United Nations Principles for Responsible Investment

UNEPFI United Nations Environment Program Finance Initiative

UNGC United National Global Compact

WWFCP World Wildlife Fund Conservation Partnership

GTSC Group Transformation and Sustainability Committee


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1 NEDBANK GROUP INDUSTRY AND CORE BUSINESS

The Nedbank Group Limited is a centenary bank-holding institution, grown to become part of Big

Four group in South Africa, currently standing as the smallest of the group in terms of market

capitalisation, with Nedbank Limited as its main subsidiary. The groups shares were listed on the

JSE for the first time in 1969 and at the Namibian Stock Exchange in 2007 (Nedbank, 2012).

The Groups three main financial services are wholesale and retail banking; insurance and asset

management, which are offered through five business groups covering the entire spectrum of

banking services in the local industry, namely: Capital, Corporate, Business, Retail and Wealth

clusters; focusing its regional offer in Southern Africa and recently Pan-Africa through an alliance

with Ecobank lnc., while positioning it self as the leading bank in terms of sustainability and client

centred focus (Nedbank, 2012). Figure 1.1, highlights specific events during the groups last seven

years, plotted along the banks share price at the end of each year.

Figure 1.1: Nedbank Historic timeline.

Source: Nedbank, 2012 and McGregorBFA, 2012.

In terms of the financial sector, according to Matoti (2010:10), the SouthAfricanbanking industry

has endured and intense transformation in the past a few decades. Nonetheless, particularly well

advanced and close to those in industrialised nations. It is for the most part perceived as a world-

class industry, with satisfactory capital assets, innovation and infrastructure and a solid

administrative and statutory environment. This unyielding regulatory framework is considered to be

responsible of having safeguarded the sector from the worldwide financial crises initiated in 2008.


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South Africa, nonetheless, was faced with a financial decline during 2009, which affected customer

spending behaviours, resulting in higher reluctance to undertake more debt obligations.

Consequently, the non-performing loans increase had a big impact on the financial institutions

books. The aggregate assets and liabilities declined in 2009 but have begun to increase as the

nation is moving out of recession, while the banking sector continued to apply stricter loaning

measures as a consequence of the implementation of the National Credit Act in 2007 (Matoti,

2010:11)

Bishop (2011:11) is of the opinion, that business confidence has started to climb in South Africa,

with the Rand's robustness providing a lift as foreign speculators are acquiring higher-yielding

assets such as SA securities, and domestic growth turned out at 3.1% y-o-y. Local private sector

spending and Capex are anticipated to grow, the former determined by pure salary-wage increase

and unsecured lending, and the latter driven by government and parastatal public spending. These

factors, together with the fact that SA financial institutions remained well capitalized, profitable and

with good levels of liquidity and debt ratios over the past years, shield by the tight government

exchange controls have reduced the risk of future downward trends and euro-zone debt crisis

contagion.

While for quite some time, Private Banking was perceived as environmentally neutral, this

condition has radically changed in recent years. While this neutrality might appear so in terms of

their internal operations, the impact on the environment caused by their financial decisions has

increasingly become more evident, as ultimately, these institutions are responsible for defining and

adhering to policy frameworks, which purposefully reject or favour certain kinds of investments

(Dash, R. 2008:26).

In addition to this, and according to the Water Financial (2010) amongst others, the level of

corruption and poor financial practices unveiled by the 2008 crisis negatively impacted the general

public view upon financial institutions. All of this factors, have been intensified by an increasing

awareness by the general public about sustainable practices, environmental impact and social

inequalities, which have pushed financial institutions to rethink and revaluate their commercial

proposition.

Whereas these issues have only recently become private banking institutions broad concerns,

Nedbank adherence to these principles can be tracked back to 2004, where under the leadership

of Tom Boardman, the Values and Brand (SVB) workshops were introduced. Back then, through

this workshops, the Deep Green values were presented to the stakeholders (Barrett, R., 2009),

aiming to translate and expand the banks financial services into the creation of added value by

endorsing ESG initiatives, and a diversified portfolio of products in health care, alternative energy,

fair trade, social dwelling, and community micro businesses.


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2 ESG NEDBANKS DUE DILIGENCE

In order to perform the due diligence (DD) on ESG matters for the Nedbank Group, this paper will

base its analysis on the comprehensive framework provided by the Commonwealth Development

Corporation (CDC) UK government owned development finance institution. The ESG CDC Toolkit

for fund managers was developed in order to provide an indication to their partners on how

successful ESG standards could add value on their investment processes. According to the CDC

Group (2011), the first point a DD ought to evaluate is if an organisation is compliant with all

important laws and regulations, including a review of information available for the general public in

order to examine the business worthiness or lawful debates, in terms of environmental, social and

governance issues.

Appendix A, provides the DD questionnaire that was followed in order to assess the ESG standing

of the Nedbank Group. Due to evident constraints, the sources of research were limited toNedbanks 2010 and 2011 Annual Reports, as well as information available on the Internet. The

DD questionnaire findings were triangulated against the United Nations Global Compact Self

Assessment Tool and the B-Corporation CRSHub assessment in order to gather a more unbiased

assessment.

The comprehensive and detailed DD executed, puts in evidence that the Nedbank Group has very

high and very well standardised ESG reporting standards. As can be seen in Appendix A, there

were very few areas in which the group does not have a policy or initiative in place in order to

communicate either internally or externally their corporate social and environmental strategies. Out

of the 62 questions only three points came out under question, being these the No Local

adherence to the Fundamental ILO Conventions; the Large or serious law suits and the Media

references to illegal or disreputable activities, which are described in detail below.

The former issue, is acknowledged in their UNGC Communication on Progress statement (2012),

were under Criterion 9, reference to pertinent worldwide conventions and other global instruments

such as ILO Core Conventions is shown unmarked and the whole Labour chapter is self assessed

as the lower area covered out of the four evaluated as shown on Figure 2.2.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Human Rights

Labour

Environment

Anti-Corruption


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Figure 2.1: UNGC Issue Area Coverage Nedbank 2012 (Self assessment).

Source: UNGC, 2012.

Out of the other Big Four banks in SA, only FirstRand Group participates in the UNGC, so no

meaningful comparison could be established against the local competitors. Nevertheless, is worth

mentioning that the FirstRand report is remarkably less comprehensive and the mere fact that no

other local financial institution participates in this initiative could be interpreted as an indication of

the level of commitment and leadership that Nedbank has in the local sector. This assumption is

supported when we analyse the ratings given by the B-Corporation CSRHub against the other

larger South African banks, as seen on Table 2.1 below.

Table 2.1: Big Four Corporate and Social Responsibility (CSR) assessment

Source: CSRHUB, 2011 and Rea, M. 2011

Whereas the Big Four rating are higher than the local sector, it is evident that Nedbanks ratings

are consistently superior against its peers, across the all dimensions. The heat map used to

display the scores, also highlights the fact that Community, Employees and Environment

categories are the areas of leaser performance by the industry, whilst Governance, including areas

such as board composition, compensation, transparency and reporting receive higher overall

attention by the financial sector.

The second issue, Large or serious law suits, is brought forward because if the dispute raised by

ABSAs determination to go to court in an attempt to recuperate more then R 773m from Nedbank

for claims in losses endured after the Pinnacle Point Single Stock Futures (SSF) took over, being

this the first time such a big claim is made between institutions belonging to the Big Four cluster.

Absa's summons blamed Nedbank for breaking the principles of the Takeover Regulation Panel,

the Competition Act as well as the Banks Act. stating that Nedbank did not get authorization from

the regulator nor the Competition Tribunal to acquire Pinnacle Point (Kamhunga, 2012); and while

Nedbank effectively contended in a hearing against the Securities Regulation Panel in 2010 that it

was only an intermediary with no intent on attaining control of Pinnacle (Bonorchis, 2012), the

damage to the public image was already inflicted.

The final point worth mentioning was identified by the Media references to illegal or disreputable

activities question under business integrity, in the CDC DD template. This, with reference to the

report published in 2011 by a group of NGOs, namely Urgewald, GroundWork, Earthlife Africa and


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BankTrack, were the portfolio of 93 financial institutions was examined in order to identify the main

coal sponsors and lenders; proving, according to the authors (Schcking, Kroll, Louvel, & Richter,

2011) the first comprehensive climate ranking for financial institutions.

The report, was subsequently used by the Mail & Guardian (Baillie, 2012) to denounce Nedbanks

ranking at 76 in the list, with a total of 85 million euros invested in Eskom operations since 2005,

something the author found as enough evidence to blame Nedbank for Greenwashing, forcing the

Group to emit a media release in which the bank supported its investments claiming carful

consideration to ESG issues based on the Equatorial Principles and a constant engagement with

its clients in order to minimise operational impact, advise on investments on energy efficient

sources and renewables and mining rehabilitation programmes (Burnett, 2011).

Regarding the declaration in terms of the EP evaluation, Table 2.2 below, shows the number of

projects that have been drawdown since 2007, by Nedbank Capital, under adherence to theInternational Finance Corporation (IFC) standards and legislation, which not only demonstrates a

substantial commitment from the Group to their Deep Green Aspirations but as argued by

Chonco (2009) the benefits behind the adoption outweighs its cost, since as a signatory between

other benefits, Nedbank has access to funding from the IFC and various Multilateral Development

Banks; makes marketing sense as a branding differentiator and responsible Green Bank;

provides assistance on partnering with other international signatories and helps reducing financial

and reputational risk.

Table 2.2: Nedbank Equator Principle Deals 2007-2011

Source: Nedbank, 2011a

3 GENERIC TYPES OF COMPETITIVE ENVIRONMENTAL STRATEGIES FRAMEWORK

As an exhaustive and detailed DD based on the CDC Tool kit, was undertaken, rather than

performing a further analysis of the Global Reporting Initiative (GRI), this paper will focus instead

on the analysis of Nedbanks Competitive Environmental Strategy (CES) analysis as described by

Orsatos paper (2006), in order to assess the groups risks and opportunities as well as

environmental initiatives overall strategic alignment.


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It is nevertheless worth mentioning that in 2011, a joint financial and non-financial assurance team

carried the external audition of Nedbanks Integrated Report, given as a result the inclusion of

additional key performance indicators (KPIs) in order to strength the inspection and evaluation

process (Nedbank, 2011b). The Assurance Statement from the external auditors found that

Nedbanks assertions concerning the alignment with the AA1000APS guidelines of materiality,

inclusivity and responsiveness are justly indicated and that the chosen KPIs for the assurance

statement analysis and the self-declared of the GRI G3.1 A+ application level are in accordance to

the GRI G3.1 principles.

The most important point behind Orsatos strategic framework (2006) is that of properly identifying

and qualifying the CSR investments, in order to understand the different conditions that would

need to be satisfied to render the environmental initiative profitable for the organisation. ESG

initiatives profitability are highly context related, and therefore without the proper strategy

alignment, market analysis, differentiating value proposition or clear expectations these initiatives

wont translate into sustainable value for the organisation and its stakeholders.

Below, Figure 3.1 classifies Nedbanks ESG main initiatives in the Generic Competitive

Environmental Strategy framework in order to identify sources of competitive advantage. According

to Orsato (2006), this decoupling is critical for the understanding and selection of particular

circumstances in which corporate environmental strategies may enhance the competitiveness of

the company. (Strategy 2 quadrant has been enlarged for this analysis).


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Orsato (2006) argues that this competitiveness can either be acquired either through brand

positioning or resource-based strategies. According to Porter (cited in Orsato, 2006) a favourable

brand positioning means getting an advantage though cost leadership or value differentiation; while

the resource-based perspective would pivot around the firms use of the available resources and

not as a function of the industry configuration, therefore, the focus lies in the firms internal

capabilities to source and manage these assets (Orsato, 2006).

Figure 3.1: Generic Competitive Environmental Strategies.

Source: Nedbank, 2011a and Orsato 2006.

In this case, based on the framework by Orsato (2006), Nedbank does not only pursue efficiencies

on their internal processes but also strives towards achieving full recognition from the public for

their efforts. They are most certainly investing large amounts of resources subscribing to

STRATEGY 1

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STRATEGY 4Environmental Cost

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Beyond Compliance Leadership

STRATEGY 3

Eco-Branding

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Climate

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UNEPFI

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UnitedNations

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international business codes and certifications; unprofitable environmental developments and

marketing in order to communicate these efforts.

These investments, and the fact that in many of these initiatives Nedbank has been the first

signatory in SA (ie. Carbon Neutral, UNCG, etc), evidently has given the Group a differentiation

advantage that puts them as the leader in the sector and allows the bank to harvest first mover

advantages. Nevertheless, these efforts come at a cost, and as the industry constantly bends

towards implementing even more ambitious practices, the boundaries for beyond compliance

strategy stretches further, and the differentiation factors slowly become commodities and industry

standards, the firm will have to continue developing new competencies and creative innovations

(Orsato, 2006). Table 3.1 shows some of the key benefits and trade-offs considered by Nedbank,

according to Chonco (2009).

Table 3.1: Nedbank Sustainability Cost-Benefit summary

Benefits Costs

Singing to EP has allowed the Group to get fundingfrom the IFC, MDBs and DFI. Organisations withstringent environmental and social policies forfunding.

Lack of understanding and appreciation forenvironmental and social initiatives might generatethe loose business to other financial institutions withless strict policies.

Green initiatives and efforts have provided then bankwith a strong market differentiator while adopting EPhas improved their compliance processes, marketreputation and effective risk management,subsequently translating on a and a competitive

advantage.

Direct costs driven by the implementation ofenvironmental management systems, Certificationand endorsement, Green marketing andadvertisement, monitoring and reporting and externalscrutinity.

These initiatives, in particular the EP, have allowedthe Group to become the bank of choice for the othersignatories Banks in international agreements.

Nedbank considers the implementation of EP as anextension of their green aspirations. As the bank isconstantly scrutinised by the public and NGOs,reputational risk is critical.

Sustainability efforts decrease monetary andreputational risks, allowing for a proactiveidentification of financial threats and helpdetermining the required systems for risk mitigation.

Greater level of stringency comparing with domesticenvironmental and social legislations.

Source: Chonco, 2009

According to Orsato (2006) the investment profits that might be realised out of these four strategies

rely on many variables, running from the organisations internal capabilities to the external

structure of the banking sector. Nevertheless, when focusing and delivering effective ESG

strategies, a holistic combination of both positioning and resource based perspective is required.

The sustainability value framework, developed by Hart and Milsteins (2003) helps assessing the

level of integration and consistency of the sustainability strategies and stakeholders value

expectations, something achievable only by having a balanced portfolio between all four

quadrants.


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Figure 3.2 shows the Sustainable Value Framework for the Nedbank Group. From it, is evident that

Nedbank currently creates shareholder value by having a broad portfolio across all four quadrants,

which could further enhance value creation by tapping on the following opportunities:

Figure 3.2: Nedbank Sustainable Value Framework.

Source: Nedbank, 2011b and Hart et al. 2003.

Clean technology and branding: Nedbank should continue developing its existing capabilities

towards serving previously untapped markets as well as new technologies that facilitate and bring

financial solutions to un-served customers. Technology and renewal energy, will become a key

source of new investments as these strive to obtain energy in cleaner and more efficient ways;

while adherence to the EP, and the UN Principles for Responsible Investment, render any financial

endowment on traditional energy sources difficult to justify for the Nedbank Group.

Pollution prevention: Further strengthening of internal systems such as Groups Social and

Environmental Management System (SEMS)not onlyallow the bank to control and minimise social

and environmental impact, but also to safeguard shareholders investment by striving for

responsible, and transparent business best practices while attracting new like minded clients with a

trustworthy platform to finance their projects (Nedbank, 2011c).


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Sustainability Vision:Growing market share in the green economy, is a key element of the Groups

strategic objective. As previously identified in the competitive environmental framework, Nedbank

has established a leader advantage and a clear competitive focus that differentiates their services

from those of its peers, positioning it self in a strong place in order to develop and create wealth at

a massive scale, taking advantage of Africas demographic and economic growth.

Product Stewardship: In order to engage with stakeholder through business and governance

transparency, Nedbanks reporting and communication strategies are a key factor for success,

demanding close engagement with the different players along their entire value chain, such as

suppliers, regulators, auditors, customers and communities, as well as media and NGOs. It also

implies the assumption over the responsibility beyond conventional boundaries, including

assessment of the impact from raw resources required for the service of their financial instruments

to the disposal and decommissioning of such projects by their clients.

4 CONCLUSION AND RECOMMENDATIONS

De Boer (2012), is of the opinion that there was a dramatically important change in the way private

business see the role they play and the way they approach ESG issues, at the Rio+20 UN

Conference on Sustainable Development in 2012. While policy makers are frozen by the current

state of their economies and political turmoil, private institutions has taken a more proactive

perspective and have recognized that they can not wait for the politicians to resolve sustainability

concerns, rather business need to take action on their own. According to him, there was evidence

of a shift in the way companies address their bottom line, and include people and planet in their

equation.

This due diligence, clearly shows that Nedbank is in the right track, and has managed to make this

shift earlier than many other financial institutions, both locally and globally, supporting the Groups

desired positioning in the industry as the Green Bank leader in sustainable matters and provided

with the opportunity to build experience and expertise for more than two decades, while pioneering

and profiting from the new opportunities generated by this new markets, such as:

Revenue growth by leveraging financial requirements in emerging markets, such as efficient

and clean energy, sustainable businesses, green building etc

Carbon neutrality and trading advisory and on transactions with environmental commodities

Enhancing of brand identity as a responsible for community and social stewardship

Identification and development of energy efficiency projects

Identification and development of Clean Development Mechanism Projects (CDM)

EPs as a usuful risk management tool for portfolio risk management

Triple bottom line (3BL) analysis and impact assesment


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5 REFERENCES

Baillie, M., 2012. Did you buy into Nedbanks greenwash?. [On Line]. Available from:

http://www.thoughtleader.co.za/mikebaillie/2012/01/26/did-you-buy-into-nedbanks-greenwash/

[accessed 24 July 2012]

Bishop, A. 2011. BASA Annual Review 2011. [PDF]. Available from:

http://www.banking.org.za/resource_centre/banking_association/publications/publications.aspx


Bonorchis, R., 2012. Barclayss Absa Sues Nedbank for $95 Million Over Trading Losses. [On

Line]. Available from: http://www.businessweek.com/news/2012-01-12/barclays-s-absa-sues-

nedbank-for-95-million-over-trading-losses.html [accessed 24 July 2012]

Burnett, B, 2011. MAIL & GUARDIAN RESPONSE TO THE 'WHO IS FINANCING CLIMATE

CHANGE' REPORT. [On Line]. Available from:http://www.nedbankgroup.co.za/mediareleases/media2011/mediaReleases_2011_11_30.asp


CDC Group, 2011. Toolkit on ESG for fund managers. [PDF]. Available from:

http://www.cdcgroup.com/uploads/finalcdctoolkitforfundmanagers20101.pdf [accessed 21 July

2012]

Chonco, M. 2009. Assessing the adoption of the Equator Principles by financial institutions in

South Africa. Unpublished Master dissertation. Johannesburg: Gordon Institute of Business

Science.

CSRHub, 2011. Corporate Social Responsibility, CSR and Sustainability Reports. [Online].

Available : http://www.csrhub.com/. Accessed: 22 July 2012.

De Boer, Y., 2012. KPMG Sustainable Insight Special Edition. [PDF]. Available from:

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/sustainable-

insight/Documents/rio20-debrief.pdf [accessed 18 July 2012]

Hart, S. and Milstein, M., 2003. Creating sustainable value.Academy of Management Executive,

17 (2), p. 56-69.

Kamhunga, S., 2012.Absa takes Nedbank to court over Pinnacle Point. [On Line]. Available from:

http://www.businessday.co.za/articles/Content.aspx?id=162378 [accessed 24 July 2012]

KPMG, 2011. Sustainable Insight. [PDF]. Available:

http://www.csreurope.org/data/files/For_news/Sustainable_Insight_Jan_2011_2.pdf . Accessed: 22

July 2012.

Laszlo, C., Sherman, D., Whalen, J., and Ellison, J., 2011. Expanding the Value Horizon: How

Stakeholder Value Contributes to Competitive Advantage. [PDF]. Available from:http://www.sustainablevaluepartners.com/Upload_Module/upload/ExpandingValueHorizon05.PDF



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Matoti, M. 2010. South African Banking Sector Overview. [PDF]. Available from:

http://www.banking.org.za/resource_centre/banking_association/publications/publications.aspx


Nedbank Group. 2011a. Sustainable Development Performance Review. [Online] Available:

http://www.nedbankgroup.co.za/pdfs/SustainableDevelopmentPerformanceReview.pdf Accessed:


Nedbank Group. 2011b. Nedbank Group Limited, Integrated Report[PDF] Available:

http://www.nedbankgroup.co.za/financial/Nedbank_ar2011/downloads/Nedbank_Group_AR.pdf

Accessed: [accessed 4 July 2012]

Nedbank Group, 2011c. United Nations Global Compact CEO Water Mandate Communication of

Progress for 2011. [On Line]. Available from:

http://ceowatermandate.org/files/endorsing/Nedbank_MandateCOP_2011.pdf [accessed 20 July

2012]

Nedbank Group, 2012. Nedbank Group Profile. [On Line]. Available from:

http://www.nedbankgroup.co.za/aboutGrpprofile.asp [accessed 21 July 2012]

Orsato, R., 2006. Competitive Environmental Strategies: Whne does it pay to be green?. California

Management Review, 48 (2), p. 127-143.

Rea, M., 2010. King III and GRI+11: A 2010 review of sustainability reporting in South Africa .

[Online] Available: http://www.sustainabilityservices.co.za/2010Reports/KingIII&GRI11-FINAL-

MHR-19May.pdf. Accessed: 12 April 2012.

Schcking, H., Kroll, L., Louvel, Y., and Richter, R., 2011. Bankrolling Climate Change. [PDF].

Available from:

http://www.banktrack.org/download/bankrolling_climate_change/climatekillerbanks_final_0.pdf


United Nations Global Compact, 2011. Communication of progress and discussion. [On Line].

Available from: http://www.unglobalcompact.org/COPs/advanced/16583#human_rights [accessed

22 July 2012]


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Table A.1: ESG DD Questionnaire

General questions Yes No Comments

Compliance with all relevant laws, standards andregulations?

No significant fines werereceived during the period

Code of BankingPractice

Sector Guidelines

King III

GRI1

AA10002

Local law enforcement situation? No significant fines receivedfor non-compliance in thisregard in the reporting period

Record keeping? Nedbank Code of Ethics

Permits and licences: obtained and up-to-date? Stakeholders Engagement

Risk management processes? Enterprise wide riskmanagement framework(ERMF)

Environmental, social and business integrity track-record?

Nedbank Code of Ethics

Certifications obtained (e.g. ISO 14001; OHSAS)? See

Refer to Appendix B For investments with significant risks: compliance withthe IFC Performance Standards and Environmental andHealth and Safety Guidelines? See Appendix 5.

Adherence to other relevant international standards?

Supply chain practices? Nedbank GroupProcurement

The Environment Yes No Comments

Effluents? Section 4: Environmental

sustainability Emissions? GHG EMISSIONS

INVENTORY

Water pollution? Section 4: Environmentalsustainability

Air pollution? GHG EMISSIONSINVENTORY

Energy use? 12% reduction by the end of2015

Natural resource use? WWF Partnership

Water use? 10% reduction by the end of2011


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Waste management? 10% reduction by the end of2011

Land clearance?

Sensitive forests or other habitats? WWFCP

Biodiversity loss? WWFCP

Climate change: risks and opportunities? CLIMATE CHANGEPOSITION STATEMENT

Other environmental impacts? Refer to Appendix B

Social matters

Labour and working conditions Yes No Comments

Local adherence to the Fundamental ILOConventions?

X UGCC Criterion 9

Local minimum working age in line with ILO

Conventions 138 and 182?. Company compliance? SUPPLIER CODE OF

CONDUCT

Local minimum wage levels? Company compliance? Remuneration Report

Discrimination? Internal Ombudsman, UGCCCriterion 9

Representation and unions? Collective Bargaining chapter

Vulnerable labour? Eyethu schemes, adherenceto EP, BBBEE level 2

Health and safety Yes No Comments

Types and level of health and safety risks? OHS programme above 95

Protective measures, procedures and equipment? Health and safety (OHS) act,85 of 1993, Compensation forOccupational injuries andDiseases act (COID), 130 of1993 and internal OHSpolicies

Safety record?

Training?

Other social matters Yes No Comments

Impacts on local communities? Carbon Credits approach,NEDBANK FOUNDATION

Any particular local social issues? BBBEE

Community / NGO consultations? WWF

Relocations? Nedbank EnvironmentalPolicies

Resettlement?

Sensitive cultural heritage issues?

Risk of adverse impacts for indigenous peoples?

For remote operations: impact of company activitieson local communities? Use of nonlocal labour?

Accommodation and other living conditions for workersand their families?

UNGC

Retrenchments? Cultural Sustainability2011 = 7

Corporate use of security force? X


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Governance: business integrity and corporate governance

Business Integrity Yes No Comments

Transparency Internationals Country CorruptionPerception Ranking?

Ranked 64, 4.1/10.0 2011

Prevalence of bribery in industry sector? Medium

Criminal convictions? X Corruption Act and Bill

Code of conduct? Public Finance ManagementAct (PFMA), King III, Code ofbusiness Ethics andEmployee pledge

Anti-bribery training for employees? Group Transformation, Socialand Ethics Committee (TSEC)

Anti-money laundering (AML) and know-your-customer(KYC) training and procedures?

Private Finance Initiatives(PFI)

Basel Committee on

Banking Security; Financial Action Task Forceon Money Laundering;

Global Coalition for Africa;

Global Forum on FightingCorruption; and the

Group of Eight

Record of EmployeesDismissed for dishonestyRED database

Accounting and legal compliance?

Political affiliations or contributions? X Apolitical stance

Media references to illegal or disreputable activities? Bankrolling Climate Changereport and Mail & Guardian

Undisclosed or unusual beneficial ownership or carriedinterests?

No information available

Sudden or unexplained change of investors,shareholders, auditors, accountants, lawyers or otherprofessional advisors?

X No media highlights

Tax evasion? X No media highlights

Suspicious use of tax havens, off-shore companies,compensation, sources of wealth, lifestyles, fees, local

costs or transfer pricing?

X No media highlights

Large or serious law suits? ABSA vs Nedbank PinnaclePoint Group case

Reluctance to discuss business integrity issues? X Public communication inresponse to Bankrolling

Corporate governance Yes No Comments

Commitment to good corporate governance? Adherence to King III, UKcombined code

Structured and functioning board? Group Transformation andSustainability Committee

(GTSC)


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Adequate control and risk management? Social and Environmental riskManagement Systems(SEMS)

Adequate transparency and disclosure? Benchmarking by theSustainability ServicesReview of SustainabilityReporting (based oncompliance to King III andGRI guidelines) Score: 69.3%

Rank: 23

Rights of minority shareholders and treatment ofstakeholders?

BBBEE Level 2

Source: CDC, 2011; Nedbank, 2011; UNGC, 2011.


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Source: KPMG, 2011, Mlambo & Ncube, 2011, Adapted from previous Strategy Assignment.

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