U.S. banks get poor marks in global animal cruelty scorecard

Transcription:
Penny Crosman: (00:03)

Welcome to the American Banker podcast, I'm Penny Crosman. Animal welfare is increasingly becoming part of the conversation about ESG and corporate responsibility. Consumers are becoming more aware of and concerned about the animal abuse that takes place on factory farms in animal testing labs and in puppy mills. The Humane Society now has 10 million members. PETA has 9 million members and the ASPCA has more than 2 million donors. More investing apps are letting people choose animal welfare as a value they want to invest according to, including the OpenInvest app that was recently bought by Chase.

We're here today with animal welfare and finance expert Merel van der Mark. She works for Sinergia Animal, an animal protection organization based in Brazil that has been keeping a scorecard of how banks surround the world perform on several measures of animal welfare. And she's here to tell us how banks are doing and what they could be doing differently. And the scorecard could be found at banksforanimals.org/ranking-list. Welcome, Merel.

Merel van der Mark: (01:13)

Thank you. Thank you for having me and for having this chat on our ranking list.

Penny Crosman: (01:17)

Sure. So to start with, can you tell us a little bit about the scorecard, how you developed it and what you track there?

Merel van der Mark: (01:25)

Yeah, sure. So we thought it was important to assess to what extent banks and investors at financial institutions are actually incorporating protection to animals in their policies. We have seen globally that there's a lot of focus on fossil fuels, on deforestation in the policies of financial institutions, but there's still a big lack of focus on animal welfare, which is a very important issue and increasingly something consumers really care about. So we've developed a ranking in which we developed a number of criteria involving farm animals, but also animals used for sports, for education for other purposes, and assess to what extent these financial institutions actually have policies on them. Unfortunately, these banks don't score very well on the criteria that we've developed. So we've found that there's still big space for improvements.

Penny Crosman: (02:23)

All right, well, let's start with the more positive side. The banks that are at the very top of your ranking, what are some of the things that they are doing that do make them somewhat responsible when it comes to animal welfare?

Merel van der Mark: (02:39)

So some of the banks at the top of our, our ranking have actually excluded the finance for industrial farming. So that makes them come at the top. We've developed a number of criteria regarding techniques used in factory farming, like use of cages. But if they exclude completely finance to factory farming, of course they score very highly. And luckily there are a few examples of financial institutions that have done that. Unfortunately, it's a minority.

Penny Crosman: (03:14)

So who's at the top of the list. And can you just tell us a little bit about what they're doing?

Merel van der Mark: (03:19)

So we have two Dutch banks, Triodos Bank and de Volksbank. And as a third, there is Australian Ethical. So these financial institutions score full score, almost every criteria that we've developed. So including no finance for industrial farming, but also other criteria, like no use of animals for testing, for example.

Penny Crosman: (03:49)

Well. That's good. And what do you think drives them? Do you think they just have an ethical culture within their organizations or is there some shareholder pressure there?

Merel van der Mark: (04:03)

Yeah. These two Dutch banks, Triodos and de Volksbank, are really ethical banks. That it's one of their philosophy and of course, Australian Ethical has ethical in its name. So these banks are really value driven and it's part of their philosophy to do that. We've decided to include them in our ranking as an example, that it is possible to adopt such policies and this possible to be a successful financial institution, having strong animal welfare policies.

Penny Crosman: (04:40)

That they're kind of the role models in this area.

Merel van der Mark: (04:42)

Exactly, exactly.

Penny Crosman: (04:45)

So I saw you do track the largest U.S. banks, but they're all at the bottom of your list.

Merel van der Mark: (04:51)

Yes, unfortunately.

Penny Crosman: (04:53)

I reached out to all of these banks and they all declined to comment. And these included State Street, Morgan Stanley, JPMorgan Chase, Bank of America, Citi, BNY Mellon, Goldman Sachs and Wells Fargo. Now Wells Fargo, the last I looked had, had received three out of 42 points, which made it the best out of this group. How did it earn those three points?

Merel van der Mark: (05:18)

We give two points for full score, one point for half a score. So Wells Fargo scored half a point on three criteria. One is for respecting the five freedoms, which is a basic concept in animal welfare, which means that animals should have free access to food, to water and be sheltered from the elements, be free of pain, be free of stress. They only scored half a point because they didn't really enforce very well. It's just a weak mention to this. And then they also score half a point for their criteria on checking the supply chain of the companies that they finance and for transition finance. So one of the things that we assessed is if finance institutions have special finance lines transition to food systems that are more sustainable, they have something along these lines. But again, it's not a very strong commitment, so we only scored them half a point.

Penny Crosman: (06:25)

So is it kind of like they have a vague kind of policy or a guideline around animal welfare in those areas, but they don't necessarily enforce or, or do a lot about it that you can see?

Merel van der Mark: (06:42)

Exactly. It's not a full commitment. It's not enforceable and trackable.

Penny Crosman: (06:47)

All right. And I saw Goldman Sachs got two points for governance. Do you know how it earned those?

Merel van der Mark: (06:53)

So, yeah, Goldman Sachs got two points for transition finance because they do have a sustainable finance line that applies to food and agriculture, so a finance line that is meant to finance a transition to more sustainable and more animal friendly production systems.

Penny Crosman: (07:12)

And I saw BNY Mellon and Citi each got one point in that area. So again, is that because they, they sort of have a policy, but maybe they don't enforce it strongly or something?

Merel van der Mark: (07:25)

Yes. It's not a strong policy,

Penny Crosman: (07:31)

So the other four, Chase, Bank of America, State Street and Morgan Stanley, all got zero points. Do you have a sense that these banks just haven't given this thought, or do you have any insight into why this might be?

Merel van der Mark: (07:54)

Yes. I do think that these banks have not given this much thought. I think some of these financial institutions are not very good at having policies at all. But unfortunately animal welfare scores very low on the priority of many financial institutions.

Penny Crosman: (08:13)

In the countries where the banks are doing a little better. Like I think you mentioned some of the Dutch banks and I, I think there are a couple of European banks that do a little bit better, is there anything going on in those countries that is inspiring the banks to make more effort?

Merel van der Mark: (08:32)

I'm not sure exactly just how to explain this, but I think in general, European banks tend to have a little bit better policies, not just in animal welfare, but also on other topics. And I think it's partly because there's more pressure from the public and maybe from shareholders as well. I think this is a trend you also see in deforestation, for example, or for human rights or fossil fuels. So I think that's a trend that kind of repeats itself also regarding animal welfare and unfortunately American banks tend to have a little bit less strong policies, and the same same goes for banks in other regions.

Penny Crosman: (09:14)

What do you think it might take for these banks to become more aware, make more effort, have stronger policies around animal welfare?

Merel van der Mark: (09:27)

I think in general, banks tend to be sensitive to reputational risks. So if they realize that their clients and their account holders really care about animal welfare, I think they'll be more inclined to adopt stronger policies. But there's also, of course, just the financial having policies that not having strong policies companies that don't have strong welfare are higher risk of getting into conflicts and that can lead to financial losses as well. So that is also something that the bank should consider. There is an increasing concern by consumers about animal welfare. There's increasing protests against companies that do not adopt strong animal welfare criteria. So that is a risk for a financial risk for financial that they should consider.

Penny Crosman: (10:22)

Sure. And for a bank that wants to start doing better in this area. Are there any sort of simple first steps or is there any sort of playbook to putting some of the right policies in place and then enforcing them?

Merel van der Mark: (10:40)

We don't really prescribe the best way for it. Of course, ideally we would like financial institutions to have a policy that would cover all the criteria that we have assessed. But of course there are steps along the way. One thing that banks or financial institutions can consider is adopting the FARMS [Initiative] criteria, which have been developed by a group of animal protection organizations specifically for farmed animals about the concentration, how many animals can be kept per square meter or square foot and other criteria specifically for farmed animals. So that's something that has been developed specifically for financial institutions and it would be easy for them to adopt. This is still a very low bar. It still means that animals are being kept in factory farming conditions, but it is a start in from where they could improve their policies afterwards.

Penny Crosman: (11:39)

What's on Sinergia Animal's wishlist? Would they like to stop factory farming altogether or have some minimal protections in place like you were suggesting or are there other goals that the organization has?

Merel van der Mark: (11:56)

Yes, we absolutely would like to stop factory farming. Sinergia focuses a lot on the production of eggs and make sure that they're produced cage free. So that is one topic that is very high on our wishlist, to ensure that laying hens are cage free and the same applies to pigs and to other factory farm animals. Abolishment of the use of cages is a key aspect. It is on the top of our wishlist.

Penny Crosman: (12:23)

And of course you want fresh air too, because sometimes they, of course are jammed into these sheds where they barely have room to turn around. So even if there were no cages, it doesn't necessarily mean a high quality of life.

Merel van der Mark: (12:37)

No, well, absolutely.

Penny Crosman: (12:39)

This is a fascinating area and I think it's a very important area because I think if people were more aware of the conditions on factory farms and animal testing labs, they would change what they do, change the things that they buy, change the companies that they support to really put pressure on the companies behind these really unconscionable practices. So, Merel, thanks so much for coming and sharing this information about this scorecard that you produce. Again, it's at banksforanimals.org and to all of you, I want to thank you for listening to the American Banker podcast. I produced this episode with audio production by Kellie Malone. Special thanks this week to Merel Van der Mark at Sinergia Animal. Rate us, review us and subscribe to our content at www.americanbaker.com/subscribe. For American Banker, I'm Penny Crosman and thanks for listening.