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«A case study of Fair Finance Guide International Transparency & Accountability in the Financial Sector A case study of Fair Finance Guide ...»

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government can promote and encourage established norms of responsible business conduct with respect, but not limited to, human rights, labor rights, land tenure, anti-corruption, and transparency.”238 Furthermore, the government professed intention to create a National Action Plan in which the Guiding Principles on Business and Human Rights will be a core part, but whose “aperture is wider,” and has stated openness to the possibility that some issues identified in the NAP will be best addressed through legislative action.

xv Of the 79 Equator Principles Banks, five are from the US: Bank of America, Citigroup, Ex-Im Bank, JP Morgan, and the Wells Fargo Bank.

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15.1 The general public as a key stakeholder in the future of banks In a largely capital-based economy, banks are central players. Banks have the privilege to create money under regulations and decide where to invest or not. By providing loans to companies and initiatives, they act as enablers of change in a more sustainable direction or as forces of maintaining the status quo. For banks, many stakeholders are relevant. We focus here on the general public and bank clients as key stakeholders in the future of banks and in shaping banking policies. Based on an extensive and in-depth survey in 20 countriesxvi among people between 18 and 65 years, we present a global supporter profile and a sampling of our findings concerning public attitudes to banks in Japan and Brazil.

Initiatives such as the Fair Finance Guide reflect people’s need to feel empowered in order to allow their money to benefit the world in an ethical and sustainable manner. Understanding who bank clients are and what their attitudes are to banks and the future of banking is instrumental for transforming the banking sector in a more fair and sustainable direction. Our analysis here looks at the clients of two large banks: the Japanese Mitsubishi UFJ Financial, which has assets of US$2.7 trillion, and the Spanish Banco Santander, with assets of more than US$1.6 trillion.

15.2 Values segmentation and the perceived role of banks

People’s opinions may change in the course of time, but values are deeply embedded in who they are as a person. Motivaction’s Glocalities research program attempts to understand the underlying reasons behind people’s attitude regarding, for example, a more ethical banking model.xvii A rich database of more than 23.000 people from 20 different countries across 5 continents allows “mapping” the global views on banking and the potential support for initiatives such as the Fair Finance Guide. Our survey included the top 15 banks in each of the 20 countries, profiling their clients and their attitudes and preferences concerning bank investments and policies.

For this first global analysis, we considered the statements “it is an important responsibility of the banking sector to invest in solving humanitarian problems” and “the investment and credit policies of banks should be more transparent to the general public”. The possible answers range from “I completely agree” to “I completely disagree”. It then becomes possible to segment bank clients into two distinct groups: those who agree or strongly agree with the statements (10.973 people in 20 countries, labeled “fair banking proponents”) and those who either disagree or are neutral (4.759 people among the sample, labeled ‘’others’’). Based on this categorization, certain attitudinal differences emerge while sketching the personas of fair

banking proponents and others. Three main aspects distinguish fair banking proponents:

xvi Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Poland, Russia, South Africa, South Korea, Spain, Turkey, UK, USA, Netherlands and Belgium.

xvii For more information about the Glocalities values segmentation model, see: www.glocalities.com.

-94First, proponents form a consistent audience that has a broad and developed sense of social responsibility. They are of the opinion that many things should be different in society. They strongly believe that the business community should make solving social problems part of its duty, taking advantage of its central position in the economy and its global reach to numerous corporations, in order to contribute to a more just society. More often than not, fair banking proponents are dedicated employees, who show great passion for their work. This could render them important agents of a more sustainable business model in the companies they work for. The second distinguishing factor is the greater sensitivity of proponents for the arts and forms of free expression in general. They can often be described as open-minded idealists, who adhere to self-development and culture. They are true world citizens, feeling closely connected to the rest of the world, with low levels of patriotism about their respective country. The third distinguishing factor of fair banking proponents relates to their ambitious attitude and their great desire to make an impact in their communities. They realize that what happens in the world also affects their own life in some way. Not only do they feel more empathy towards the less fortunate, but they also look for ways to get involved in change-making processes personally, by working for an organization that contributes to social improvement. Proponents are interested in politics, as this is another way through which they can make an impact.

The values and attitudinal differences between proponents and others are also present when looking at these two groups from a Glocalities segments perspective. The model is based on two fundamental dimensions which are highly explanatory for values differences between consumer segments. On the horizontal axis one finds the psychological dimension. This shows whether people are focused on a sense of belonging and familiarity or whether they are more exploration and change-oriented. On the vertical axis we find the sociological dimension.

This dimension shows whether people are more focused on control and obedience or whether they are more oriented towards the freedom to make individual choices.

Five values segments occupy the graph area. These segments are based on cluster analysis (latent class analysis) on an extensive set of values statements from the survey.

 Conservatives: family oriented people who value traditions, etiquette and an organized life.

 Socializers: sociability seekers who love entertainment, freedom and family values.

 Achievers: entrepreneurial networkers who focus on family and community life.

 Challengers: competitive careerists, fascinated by money, taking risks and adventure.

 Creatives: open-minded idealists who adhere to self-development and culture.

The following graph shows the prevalence of each values segment among Fair banking proponents, based on the two statements mentioned earlier.

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15.3 Taking a deep dive into two important markets Japan (with a nominal GDP of 4.9 trillion) and Brazil (with a nominal GDP of 2.2 trillion) belong to the 10 largest economies. Values segmentation allows zooming into each country in order to attest what makes the local fair banking proponents unique, while considering distinctive cultural factors.

-96The analysis reveals that Brazilian proponents are more likely to be Conservatives and Achievers. They want to contribute to society personally, and consider business ethics utterly important. They try to lead an environmentally responsible lifestyle, because they believe that we are all affected by what happens globally. They are also more able to show empathy towards other people. These characteristics differentiate them from the rest of Brazilians, who more often belong to the segment of Challengers.

Japanese proponents demonstrate unique characteristics as well. Their priorities are rather economy-related. They aim for financial security, but also plead for less income inequality.

They are very proud to be Japanese, more so than other Japanese. A greater degree of empathy differentiates them from the rest of Japanese respondents. This is a characteristic which they actually share with the Brazilian proponents. In Glocalities language, they belong more often to the values segments of Creatives and Conservatives.

Moving towards a more refined analysis, we take a closer look at the clients of the two largest banks in Brazil and Japan. The Glocalities survey covers a large number of variables, which allows sketching an in-depth profile of 233 clients of Mitsubishi Bank, and 206 clients of Santander Bank (aged 18 to 65 years).

Both client groups generally have limited trust in bank institutions, with Mitsubishi clients being slightly more willing to trust their bank than Santander clients. Actually, more than half of Santander clients explicitly state that they do not trust banks, while one third of Mitsubishi clients are unsure about whether they trust banks.

When taking a closer look to bank clients from two countries that are culturally distinct, certain distinguishing aspects come to light. Mitsubishi clients are especially competitive and geared towards reaping the benefits of their efforts. They recognize that politics and economy are closely related. They have high expectations from their lives, making it a priority to be financially secure. This goes hand in hand with a strong desire to have a comfortable life, in which material possessions play an important role. At the same time, Mitsubishi clients remain distinctly Japanese. They are proud of their heritage and attribute great importance to preserving Japanese culture and living according to age-old social rules. In Glocalities segments language, Mitsubishi clients belong overwhelmingly to the group of Challengers.

There are also relatively more Achievers among them and slightly fewer Conservatives, compared to the whole country of Japan. Santander clients are generally supportive of a fairer banking model. 76% of them believe that the investment and credit policies of banks should be more transparent to the general public. Similarly, the overwhelming majority of Santander clients believe that it is an important responsibility of the banking sector to invest in solving humanitarian problems. Santander clients are ready to personally get involved in helping other people. In Glocalities segments language, Santander clients are more likely to be Conservatives and Achievers. This differentiates them from Brazilians as a whole, where Challengers form the greatest group.

When asked about the issues that they would tackle, if they would have the chance to make an impact by financing a company, views among the two groups are aligned to their distinctive mentality. Mitsubishi clients see tackling fiscal issues (e.g. promoting tax compliance) and reducing corruption as prerequisites for them to finance a company. This also differentiates them from the Japanese population, whereby these issues are considered slightly less

important. Santander clients are more in favor of tackling ethical and sustainability issues:

promoting ethical bonus arrangements and preserving the natural environment are considered especially important criteria among them. Though Brazilians as a whole appear socially responsible, Santander clients share this mindset to an even greater degree, which renders them distinctive.

-97Conclusions and opportunities The need for more sustainable and transparent banking practices is evident, according to the populations surveyed. However, in order to enable initiatives such as the Fair Finance Guide to lead to greater social change, it is necessary to identify the crucial mass in the population that supports its goals and understand the mindset and motivating factors for change in the supporter segment. In the process of identifying this crucial mass, (inter)cultural factors should not be overlooked. This is where the importance of values-based segmentation becomes most evident. The findings from Glocalities’ worldwide research in this article demonstrate that the desire for fairer and more transparent banking models is present among a large proportion of society worldwide. The respondents identify certain overarching issues that the banking sector needs to address. Among others, banks should work on regaining trust and move beyond the practice of focusing on profit in the short term. In order to achieve this, Fair banking proponents think that more supervision on banks is needed.

Reforming the banking sector requires a holistic, yet culturally-informed approach, whereby values segmentation is a valuable tool in three ways. First, values segmentation allows for a deeper understanding of the thought processes and motives of proponents in order to generate critical mass and achieve greater change of banking policies. Second, a better understanding of proponents enables effective communication which addresses public opinion and supports key elements of the Fair Finance Guide vision, analysis and background. Finally, an improved understanding of the fair banking proponents will not only help stakeholders individually to reach that group, but also act as impetus to bring stakeholders from various domains together.

-98Appendix 1 Analysis Tool Policy Assessment The following tables present the elements used for the analysis of financial institution’s investments and finance policies, sustainability and /or financial annual reports.

Table 21 Assessment Elements Theme Transparency & Accountability

The following elements are crucial for a policy regarding the financial institution's internal operations:

1 The financial institution describes its Environment and Social Risk Management System and provides insight into how the financial institution ensures that investments meet the conditions set in its policies.

The financial institution describes the way in which its responsible investments policies are implemented and which procedures are followed.

The financial institution uses ESG-screening to select companies to invest in.

The financial institution uses engagement to influence the companies invested in.

The financial institution uses voting to influence the companies invested in.

The financial institution publishes a list of companies that are excluded from loans and other investments.

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