ESG standards in Portugal PSI companies case study

Corporate Social Responsibility has been growing to record significance in the XXI century. Investing patterns around the globe are suffering a deep shift towards the prioritization of conscious practices. Once the exclusive domain of impact investors and sustainable development funds, today ESG (Environmental, Social and Governance) considerations are being mainstreamed by the world’s largest asset managers, insurers, banks and pension funds. According to the Forum for Sustainable and Responsible Investing (USSIF) (2021), there are now more than US$30 trillion of assets globally under management with an explicit ESG mandate, an increase of over 50Through the investigation of selected organizations within the Portuguese market, this research seeks to provide input on the status of ESG standards adoption by some of the most prominent Portuguese enterprises, showing risks and/or opportunities for these groups to increase international competitiveness. The objective is to examine selected companies of PSI – the Portuguese Stock Index –, look through their internal processes, resources, values and drivers so as to conclude on where they rank relatively to ESG score. The return was an average of 65.5$30 biliões de ativos geridos considerando indicadores ESG, um aumento de 50% em apenas três anos. No mesmo período, duplicou o número de empresas que reportaram esses mesmos indicadores, alinhados com as normas internacionais. Um (cada vez maior) conjunto de evidências demostra que empresas com fortes práticas a nível de ESG, têm uma melhor performance financeira, no âmbito de cotação de ações, crescimento económico, rentabilidade de capitais e avaliação de crédito. Através da investigação de corporações selecionadas, esta pesquisa tenciona providenciar informação sobre o progresso de adoção de padrões ESG por parte de algumas das mais proeminentes empresas portuguesas, detalhando riscos e oportunidades para um aumento da competitividade das mesmas a nível internacional. O objetivo é examinar as empresa selecionadas do PSI (Índice da Bolsa Portuguesa), analisar os seus processos, recursos, valores e motores de crescimento, de forma a traduzir estes parametros em valores e chegar a uma avaliação numérica de medidas ESG. O resultado foi uma média de 65.5% conformidade entre as organizações estudadas, quando considerando os três pilares da pesquisa. Isto demonstra um progresso relativamente baixo em relação a inovação responsável, o que leva à conclusão de que os sujeitos em estudo consideram satisfatório e adequado um nível moderado de performance ESG

The intellectual capital - environmental practices, performance and their relationships in the Romanian banking sector

Purpose – This paper reviews the knowledge assets that can be capitalized for successful Green Supply Chain Management (GSCM) implementation in the Romanian banking industry. GSCM is defined as the company’s ability to understand and manage the environmental risks along the Supply Chain (SC) (Carter and Rogers,2008). Banks are very much members of the SCs (McKenzie and Wolfe, 2004), called to integrate the environmental management into both operational and core commercial activities and to manage the environmental risk in their supply chain (FORGE Group,2000; International Finance Corporation, 2006; UNEP Finance Initiative, 2009a). Intellectual capital, or the ‘stock’ of knowledge-based equity firms hold, is recognized as a key contributor to their competitiveness (Bontis et al., 1999), which may act as a driver of environmental pro-activeness (Bernauer et al., 2006; Wu et al., 2007), as well as an obstacle in the process to design and implement GSCM (Post and Altman, 1994; Baresel-Bofinger et al., 2007), while organizational learning is seen as the key component in overcoming the organizational obstacles to environmental changes (Post and Altman, 1992; Post and Altman, 1994; Anderson and Wolff, 1996). Design/methodology/approach – This research paper describes the empirical results of a cross-sectional design employed in a sample of 41 banks operating in Romania with the purpose a. to explore the stage of designing and implementing GSCM practices in the Romanian banking sector; b. to determine which GSCM practices tend to be followed the most, c. which are the bank managers’ perceived benefits from implementing GSCM practices, as well as perceived obstacles in GSCM implementation in the banking sector; and d. what is the relationship between the aforementioned variables. For these purposes several statistical analyses were used, including both descriptive and inferential statistics. Originality/value – This is the first study looking for GSCM issues in the Romanian banking industry. The results of this research provide insights into what extent knowledge assets could be capitalized for successful Green Supply Chain Management implementation in the Romanian banking industry. Furthermore, it is increasing the ecological awareness, the theoretical and managerial insights for an effective implementation of GSCM practices in the banking sector. The analysis reveals that GSCM practices (especially practices in the immaterial flow) are strongly and significantly correlated with perceived benefits and pressures. However,this should be addressed in future research because the present study offers only correlational data and cannot establish causation. The study also concludes that bank’s size and foreign/Romanian ownership do not influence at all the level of GSCM practices implementation and related perceptions (pressures, obstacles,benefits) in the Romanian banking sector. Practical implications – The findings of this paper point to the conclusion that the banking sector in Romania is at a somehow advanced stage of ecological adaptation in the physical flow and at an early stage in the immaterial and commercial flows. Based on the literature and study’s findings, regarding the role that the management of intellectual capital and knowledge flow plays, several recommendations are proposed for enhancing the implementation process of GSCM practices in the banking industry in Romania

Incorporating ESG criteria in human rights risk management in the finance sector: the case of Banco Montepio (Montepio Bank)

Over the last 15 years, the finance sector witnessed an exponential emergence and adoption of ESG criteria - a proxy term for considering sustainability-related factors - under the remit of sustainable finance and fuelled by initiates such as the UN Global Compact (UNGC) and the UN-backed Principles for Responsible Investment (PRI), which led to a spill over effect to other sectors and industries. Not only large corporations and investors have widely adopted corporate reporting on ESG factors and issues under frameworks such as the Global Reporting Initiative (GRI), the International Integrated Reporting Initiative (IIRC) and the Sustainability Accounting Standard Board (SASB), but ESG criteria have been associated with enhanced market performance in addressing corporate risks and strategies in investment decisions and it is estimated to be worth approximately US$D 20 trillion in assets. Yet, while ESG criteria are relevant for US and UK-based financial companies, it is not clear how in other countries, including European countries, such criteria are taken into consideration by banks, particularly in human rights risk management practices. Through a real case study, this research aims to understand how a Portuguese bank, Montepio, currently incorporates ESG criteria in human rights risk management practices when compared to some of the largest financial institutions in the world. Findings will shed light on some of the key gaps in the adoption of ESG criteria and assessment of human rights issues and modern slavery for managing risk in investment decisions, with practical policy recommendations.No decorrer dos últimos 15 anos, o sector financeiro testemunhou uma emergência e adoção exponencial dos critérios ESG - um termo representativo da consideração dos fatores de sustentabilidade - sob a alçada do financiamento sustentável e estimulado por iniciativas tais como o Pacto Global das Nações Unidas (UNGC) e os Princípios para o Investimento Responsável (PRI), apoiados pelas Nações Unidas, o que conduziu a um efeito de alargamento a outros sectores e indústrias. Não só os relatórios corporativos sobre fatores e questões de ESG foram amplamente adotados por grandes empresas e investidores em quadros como a Global Reporting Initiative (GRI), a "International Integrated Reporting Initiative" (IIRC) e o "Sustainability Accounting Standard Board" (SASB), como também os critérios de ESG foram associados a um melhor desempenho do mercado na abordagem dos riscos corporativos e estratégias nas decisões de investimento e, estima-se que ascenda a cerca de 20 triliões de dólares em ativos. Contudo, embora os critérios ESG sejam relevantes para as empresas financeiras sediadas nos EUA e no Reino Unido, não está claro de que forma noutros países, incluindo países europeus, tais critérios são tidos em consideração pelos bancos, particularmente nas práticas de gestão de risco dos direitos humanos. Através de um estudo de caso real, esta pesquisa pretende compreender como um banco português, o Banco Montepio, incorpora atualmente critérios de ESG nas práticas de gestão de risco de direitos humanos quando comparado com algumas das maiores instituições financeiras do mundo. As conclusões irão esclarecer algumas das principais lacunas na adoção dos critérios de ESG e na avaliação das questões de direitos humanos e da escravatura moderna, para a gestão do risco nas decisões de investimento, com recomendações políticas práticas

Study of Instruments and Tools to Anticipate the Effects of Industrial Change - Portuguese report

This study was produced for the “Study of Instruments and Tools to anticipate the effects of industrial change on employment, trades and vocational qualifications” and for DG V (Employment) of the European Commission in the late 1994. It started when the previous Portuguese government was still ruling, the main policies were defined, and the available instruments were not used in a minimum extend. The new Government, issued from the 1995 elections, proposed “employment” as a major objective with horizontal responsibility. That’s also why there is now a Ministry for Qualifications and Employment, and another one for Solidarity and Social Affairs, not one for Employment and Social Affairs as the previous Government had. But more than that, this objective is considered to need a coordinated and consistent action that involves external affairs, industrial and regional policies, and the policies on education, training and employment, among others. The promotion of the “quality of employment” is being recently done at the working conditions, remuneration, social protection, occupational promotion levels, and the equality of opportunities towards employment and vocational training levels, and finally, the levels of qualification of human resources for a better labour market, education policy and training policy developments. In Portugal, the influence of the industrial change is produced in a top-down way; with (in some cases) an ex post analysis process to formulated training needs. This means that the industrial change impact is produced (normally, unexpectedly), and afterwards the responsible at the company level tries to know which training needs should be formulated in order those effects could be the smoother possible. The training needs at the company level is not based on anticipatory studies, neither is done any long term forecast on qualification, or even employment level.employment; qualifications; Portugal; labour market; working conditions; human resources; foresight; forecasting

Basel III: the impact of new capital requirements on profitability of Portuguese Banks

This empirical study aims to explore the impact of increased capital ratio requirements, on the ROE of the Portuguese banking sector. The paper employs both a quantitative- and qualitative approach, with the qualitative approach as the main method of research. The method adopted to conduct the qualitative research was semi structured elite interviews with banking executives. Higher capital requirements decrease the ROE of banks in Portugal, but huge impairments charges, macroeconomic factors and increased costs of deposits are clearly the dominant reasons for the reduced levels of ROE the past years. Among the measures taken to increase capital ratios, reduction of RWAs and non-core assets have been the main focus, but the issuance of CoCos is regarded as the most expensive measure due to high interest payments. However, the CoCos will not have any effect on the ROE in the long term. It is difficult to draw any conclusions on the impact of more equity in the balance sheet on the ROE of Portuguese banks, as many banks currently don’t generate enough money to pay back on shareholders´ investments

Nothing is free: a survey of the social cost of the main payment instruments in Hungary

The study applies two approaches for the estimation of the social costs of main payment instruments (cash, debit card and credit card transactions, credit transfers, direct debits, business-to-business direct debits, postal inpayment money orders, postal outpayment money orders for pensions) used in Hungary in 2009. The first approach is based on the current payment structure, while the second approach is based on a more modern, hypothetical payment structure involving less cash, with no use of paper-based methods. In the first approach, the social cost amounts to HUF 388 billion, i.e. 1.49% of the GDP, while in the second approach, such cost amounts to HUF 285 billion, i.e. 1.09% of the GDP. In this context, social cost means the use of all resources (time, materials and money) necessary for the execution of payments, calculated as a net value (i.e. exclusive of fees paid for payment services). Thus, HUF 103 billion could be saved in social costs if the use of payment instruments were to be modified.private cost, social cost, net private cost, unit cost, social savings, cash transactions, debit card transactions, credit card transactions, paper-based credit transfers, electronic credit transfers, direct debits, business-to-business direct debits, postal inpayment money orders, postal outpayment money orders for pensions

Time Series Forecasting: An Application to Balance Sheet

Internship Report presented as the partial requirement for obtaining a Master's degree in Data Science and Advanced Analytics, specialization in Data ScienceThe Internal Capital Adequacy Assessment Process (ICAAP) provides a qualitative and quantitative assessment of capital risks to which banking institutions are exposed to in their activity. Caixa Geral de Dep´ositos (CGD) is a relevant player in the Portuguese banking system, and as such it has to perform an ongoing review of ICAAP exercise to evaluate its ability to identify, assess, mitigate and report on its risks. In order to properly quantify all the risks the institution is exposed to, several models need to be developed to help estimate the amount of capital that is needed to cover potential unexpected losses arising from each type of risk. Given the European and Portuguese guidelines these models also have to comply with certain requirements defined by Banco de Portugal, European Central Bank (ECB) and European Banking Authority (EBA) regarding ICAAP exercise. One of the risks CGD is exposed to is the risk of an unfavourable evolution of the main credit items in its Balance Sheet and as such, it is necessary to estimate the evolution of certain credit items (in terms of their volumes and spread rates). These estimations are needed for relevant segments such as housing credit, consumer and other credit, public sector credit, real estate activities credit, non-financial corporate credit and term and sight deposits. To estimate the evolution of these balance sheet items, a robust and reliable methodology must be applied, so that it can truly help strategic decision-making process over a horizon period of three years and the appropriate amount of capital can be allocated. At CGD, Balance Sheet credit volumes and spread rates had been being estimated through multiple linear regressions to which macroeconomic indicators are added as explanatory variables. The problem with this methodology, is that these type of dependent and explanatory financial variables are usually in the form of time series, indicating the existence of correlation between any observation and the previous one, meaning that there is dependence on the past historical information. Applying multiple linear regressions to this type of data leads to poor statistical results and to the non-compliance of all the statistical assumptions linear regressions must respect. Within this context, the need to turn to a more adequate and robust methodology became more evident and time series forecasting appeared to be the so long needed solution that would allow to reach reliable statistical results. Time series forecasting is commonly used in economics and finance, denoting a robust technique to predict macroeconomic variables representing a feasible approach to apply to estimate CGD’s main credit volumes and spread rates of the balance sheet. In this project, we investigate the estimation of Balance Sheet credit volumes and spreads rates using time series forecasting aiming to assess the models suitability to quantify the risk of unfavourable balance sheet evolution of the main credit segments. The models proposed for this purpose, are the Autoregressive Integrated Moving Average with exogenous variables (ARIMAX) models. The results obtained proved to have robust statistical results and high performance, which were verified by analysing residuals statistical behaviour and key performance indicators such as the Mean Squared Error (MSE) and the Akaike Information Criterion (AIC) of the final models selected for each target variable

Supply of cyber insurance in banking sector operating in Portugal

Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and ManagementThe development of technology and the way of doing business exchange sensitive information all over the world through IT resources. In consequence of such reality, cyber events are more likely to occur, being the banking sector one of the major targets. However, in parallel with these new perils from technological growth, awareness of cyber risk is also increasing among institutions, as well as the search for protection and measures to fight them. Cyber insurance is one of the possible protection options. The main goal of this work is to assess the supply of cyber insurance among the banking sector operating in Portugal. As empirical investigations of cyber insurance applied in the country are rarely reported in the literature, the results are novel. In order to get the main goal, the research is based on a literature review where will be presented the “state of the art” of cyber insurance market in the world and in the country. In addition, an empirical study will be made through the application of questionnaires to ascertain the specificities of cyber insurance suppliers or potential suppliers in the Portuguese market, their perception of market evolution and knowledge about cyber risk. There is also a specific questionnaire for the supervisor entity in order to know its point of view about the topic in discussion. The main conclusions of this study relate to the fact that there is still a long way to go in the Portuguese insurance sector for cyber risk. The sector in the country started to be developed by international companies and only after that the national ones started to have more awareness on the subject, as mentioned by the Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF). However, awareness of the issue is not the only point that leads to the underdevelopment of this specific insurance. The difficulties in the product underwriting process, which on the part of those who sell as well as those who buy, the high and variable prices, the lack of historical data and the information asymmetries are examples of obstacles that still have to be overcome. Although the cyber risk insurance sector is taking its first steps, it is believed to have a large margin of expansion, as has already been the case in several other countries. The creation of information sharing platforms on cyber incidents and the design of insurance and reinsurance products for cyber incidents are considered by the participant insurers as the main measures to be taken to assist this market development. It therefore becomes an inevitable topic to be addressed by the insurance sector in Portugal

The Portuguese citizens trust state on existing banks in Portugal and their concerns when choosing a bank

JEL Classification: G2; P13Purpose: This dissertation aims to present the Portuguese Citizens trust level on the existing banks, recognizing their criteria when choosing banks. The purpose is to promote the discussion on the type of banks citizens would like to have. It also contributes to literature regarding financial crisis consequences on trust and providing arguments on the potential relevance of Cooperative banks. Method: The author uses quantitative method. Data is gathered by surveys and analyzed on SPSS - Multi Correspondence and Chi-Square Analysis. Findings: The research concludes that Portuguese Citizens are not trusting on the existent banks, since they think banks aren’t acting correctly. Citizens are also concerned with the well-being promotion that banks create rather than profit maximization. Research limitations: This research is based on the existing literature and on data gathered by telephone to 600 citizens. To understand some issues, developing qualitative research (focus groups and interviews) could be relevant. Practical implications: With financial crisis context and its consequences on trust level, the population is generally disappointed with banks. Citizens are starting looking for banks environmental, social and ethical concerned. Other types of banks should appear and the existing ones should start rethinking their products, if they want to gain any kind of trust. Originality/Value: This paper analyses the existing trust level on banks of Portuguese citizens and tries to identify the new characteristics that these citizens would like to see in a bank. Many of those characteristics are greatly linked to cooperative banking movement which could indicate a market opportunity.Propósito: Esta dissertação pretende apresentar o nível de confiança dos cidadãos Portugueses na banca, reconhecendo os critérios de selecção a quando da escolha dos mesmos. O propósito é promover a discussão sobre a preferência dos cidadãos no tipo de banca. O estudo contribui para a literatura, relativamente às consequências da crise financeira na confiança, apresentando argumentos que potenciam a relevância da banca Cooperativa. Método: O autor empregou o método quantitativo. Os dados resultam de questionário, analisados no SPSS - Análises das Correspondências Múltiplas e Qui-Quadrado. Resultados: Os portugueses não confiam na banca, considerando os bancos não estão a agir correctamente. Os cidadãos estão preocupados com a promoção do bem-estar criado pelos bancos em detrimento da maximização dos lucros. Limitações do Estudo: Este estudo baseia-se na literatura existente e na recolha de dados via telefone (600 Portugueses). Para melhor compreender algumas questões, desenvolver o método qualitativo (focus groups e entrevistas) poderia ser relevante. Implicações Práticas: Num contexto de crise financeira e das consequências na confiança, a população está, em geral, desapontada com os bancos. Os Portugueses começam a procurar bancos preocupados com o ambiente, ética e inclusão social. Outros tipos de bancos devem aparecer e os que existem devem começar a repensar os seus produtos, se querem ganhar a confiança dos consumidores. Originalidade/Valor: Esta dissertação revela a confiança nos bancos e procura identificar novas características que os cidadãos gostassem de reconhecer nos bancos. Muitas destas características estão directamente relacionadas com o movimento da banca cooperativa, indicando uma potencial oportunidade de mercado