The Environment in Germany – Panorama

The financial service providers wish to use the concept of environmental management.

The 1992 Environment Summit called on all companies to operate in a sustainable, environmentally appropriate and socially acceptable manner. One might think that the services sector, with its banks and insurance companies, is less involved in environ-mental destruction than the industrial sector. People underestimate the high energy and paper consumption of the financial service providers. But there are not only these direct local environmental effects: a more significant role is played by the finan-cial and investment decisions which often have serious repercussions world-wide.

The financial service providers wish to use the concept of environmental manage-ment to conduct their business in an environmentally compatible manner. There are two standardised environmental management systems for banks and insurance companies: the EC Eco-Management and Audit Regulation No. 761/2001 and the ISO 14001 standard. Both systems require precise figures on the ecological impact of companies’ activities. They cover both operational ecology, i.e. the consumption of energy, water and paper resources, and product ecology, i.e. the consequences of all business transactions for the environment. The financial service providers gain spe-cific advantages from accounting in environmental terms, since they are directly af-fected by the costs caused by natural disasters, industrial accidents, and pollution in mortgaged properties. The insurance claims resulting from environmental disasters amounted to US $ 180 billion in 1995 alone - three times the previous year’s level. The clients’ environmental risks have a direct impact on the risks of banks and insur-ance companies. So it is worthwhile examining both the economic and the environ-mental side in advance.

Insurance companies investing in environmentally sound stocks

More and more insurance companies are discovering the ecology trend as a market. For example, Oeco-Capital-Lebensversicherungs-AG offers life, pension and similar insurance policies based on investments in environmentally sound institutions. Sec-tors like the defence, nuclear, car, commodities, tobacco and alcohol industry are excluded. Another example is Rheinland-Versicherungs-AG, which reduces the pre-mium for car liability insurance if the car driver owns a railway pass which entitles him to discounts on railway travel. The insurance company saves money, since railway travellers use their cars less often and thus have less opportunity to cause accidents. The car drivers benefit from the reduced insurance premium.

Alternative investment funds are still niche products

Most German financial service providers are aware of their responsibility for sustain-able, environmentally compatible development. In 1994, they set up the Association for Environmental Management in Banks, Savings Banks and Insurance Companies as a forum for an exchange of views and information. In view of the financial sector’s massive influence on the economy, however, it would be desirable for banks to be even more thorough in examining the environmental impact of their project funding and to pay more systematic attention to environmental aspects in investment deci-sions, according to the independent rating agency Oekom Research AG. This agency provides information about the environmental and social activities of companies and finds that, despite the awareness of the need for environmental management, alter-native investment funds are still a niche product. For example, banks will usually only offer favourable terms to support targeted investment in environmental protection if there are government assistance programmes for this. This provides little incentive for companies to implement sustainable business practices.

The brochure "Green Finance. Umweltmanagement in Banken, Sparkassen und Versi-cherungen" can be ordered free of charge at the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety