1980 - Superfund instituted in the U.S.

The 1980 Comprehensive Environmental Response Compensation and Liability Act (CERCLA) in the US reinforced the Environmental Protection Agency's efforts to clean up contaminated sites. This act, also known as Superfund, made owners of contaminated sites liable for the clean-ups. Although the Act exempted lenders from ownership status, the complexity of the issues involved meant that some banks were forced to enter into the court procedure and some recorded financial losses.

1989 - The European Commission issues a Directive on Civil Liability for Damage Caused by Waste

The lenders' community in Europe became increasingly concerned about environmental issues when the European Commission published its draft Directive on Civil Liability for Damage Caused by Waste. This proposed that the liability for damage caused by waste could be assigned to both a producer of the waste and a person 'who had actual control of the waste, if he is not able within a reasonable period to identify the producer'. The banking community found the wording 'actual control' potentially dangerous, since the phrase could be interpreted in such a way as to lead to lender's liability in certain instances. The Bankers Federation contacted the Commission to voice its concerns.

1990 - Fleet Factors case

The Fleet Factors Corporation case was among the first in a series of legal proceedings in the US that eviscerated the banks' exemption from Superfund liability. In this case, the courts decided that 'a secured lender could be considered liable for the environmental damage on a borrower's property if the lender as much as held the capacity to influence the borrower's waste management decisions, even if it actually did not do so'.

The decision eroded much of the protection that CERCLA offered to creditors. Although the EPA has subsequently issued additional rules in an attempt to clarify the circumstances that may result in lender liability, the Fleet Factors case has had a profound impact on the financial community.

Following the Fleet factors decision, a survey conducted by the American Bankers' Association found that 63% of US commercial banks rejected loan applications because of possible environmental lender liability. Subsequently 46% of banks in this group have discontinued financing sectors considered to be environmentally risky, such as chemical facilities or service stations.

1992 - The UNEP Financial Institutions Initiative

The UNEP Financial Institutions Initiative has been developed 'to promote the integration of environmental considerations into all aspects of the financial sector's operations and services.' A secondary objective of the initiative was to foster private-sector investment in environmentally sound technologies and services.

This initiative targeted a broad range of financial institutions, from commercial and investment banks to venture capitalists, asset managers and multi-lateral development banks and agencies.

1992 - Statement by Banks on the Environment and Sustainable Development

In 1992, UNEP and the five members of the Advisory Committee - NatWest Bank, Deutsche Bank, Royal Bank of Canada, Hong Kong & Shanghai Banking Corporation and Westpac Banking Corporation - were involved in preparing the 'Statement by Banks on Environment and Sustainable Development'. All five members of the Advisory Committee became founding signatories to the Statement. By the end of 1992, 23 of the world's leading commercial banks, representing $1.5 trillion in combined assets, 50 million customers and more than 500,000 employees, signed the UNEP statement. Among other things, the signatories declared that they:

• endorse the integration of environmental considerations into internal banking operations and business decisions in a manner which enhances sustainable development;
• subscribe to the precautionary approach to environmental management, which strives to anticipate and prevent potential environmental degradation;
• expect, as part of their normal business practices, that their customers comply with all applicable local, national and international environmental regulations. Beyond compliance, they regard sound environmental practices as one of the key factors demonstrating effective corporate management;
• recognize that environmental risks should be part of the normal checklist of risk assessment and management. As part of their credit risk assessment, they recommend, where appropriate, environmental impact assessments; and
• support and will develop banking products and services designed to promote environmental protection, where there is a sound business case.

The UNEP Statement has already been signed by 91 commercial banks from 34 countries.

1993 - The Green Paper

Under the European Commission's fifth Environmental Action Programme, one of the main goals is to develop 'an integrated approach to environmental liability.' Working in this direction, in 1993 the European Commission published a discussion paper designed to invite the opinions of all interested parties about the issues related to liability in remedying environmental damage.

The Commission appeared to favour a system of strict liability that supports the 'polluter pays' approach. The Green Paper outlined that the strict liability system should be backed by joint compensation funds, financed by industry, to meet the costs of environmental restoration where a polluter could not be found, or was unable to pay, or where liability could not be established.

The Green Paper examined a number of key questions including the advantages and disadvantages of fault-based and strict liability, and the problems of causation and insurability. The banking community urged against CERCLA-type legislation in Europe, while environmental groups expressed their support for greater lender'' accountability.

While the debate continues, the issue of environmental liability remains regulated by the individual EU member states.

1994 - First international round table meeting on commercial banks and the environment

In September 1994, UNEP hosted the first international round table meeting on commercial banks and the environment, with the purpose of facilitating an exchange of perspectives and experiences in environmental management. Issues raised during the conference included:

• environmental risk assessment in relation to credit procedures;
• leveraging public and private-sector opportunities in environmental financing; and
• internal operations and environmental performance.

1995 - Global survey on the environmental practices of the financial services sector

In 1995, UNEP and Salomon Brothers Inc. released the results of their 'Global Survey on the Environmental Policies and Practices of the Financial Services Sector', involving 90 commercial and investment banks. Among its findings, the survey revealed that:

• 70% of respondents believed environmental issues had a material impact on their business;
• 80% were undertaking some form of environmental risk management related to debt financing;
• the number of banks throughout the world involved regularly in environmental-related investment and lending was expected to treble over the next 15 years.

1996 - World Bank's environmental lending reaches $11,500 billion

The World Bank has demonstrated strong support for sustainable development. By the end of 1996, it had become the largest single source of funding for environmental programmes and projects, with a total portfolio of $11.5 billion covering 153 projects in 62 countries.

As the largest international development finance agency the World Bank has a prominent role in directing resources to support sustainability. Its commitment to sustainability continues to influence strategies of the investment and commercial banking sector worldwide.

1997 - BankAmerica became the first Fortune 500 bank to endorse CERES principles

The BankAmerica Corporation became the first major US financial services company to endorse the CERES principles, a code of ethics defining corporate environmental policy. These principles were developed by a coalition of investors, companies and environmental groups called the Coalition for Environmentally Responsible Economies (CERES). Corporations that have endorsed the CERES principles or similar guidelines have traditionally been in the energy and manufacturing industries. BankBoston, the oldest US commercial bank, followed BankAmerica's example soon afterwards.

By endorsing principles developed by a non-profit organization, these financial institutions have clearly demonstrated a heightened interest in sustainable development issues. 'We hope that our action today is another demonstration of our belief that what is good for the environment can also contribute to our bottom line, said David Coulter, the chairman and CEO of BankAmerica.

1998 - Draft IFC environmental, social and disclosure policies and procedure

The International Finance Corporation reinforced its strategy of making the environment one of its priorities. In January 1998 it prepared a draft document on environmental, social and disclosure policies and procedure. This covered environmental assessment, natural habitats, pest management, involuntary resettlement, forestry, dams, and projects on international waterways.

According to the IFC, the proposals were designed to enhance environmental and social performance and, in so doing, increase the Corporation's effectiveness in promoting sustainable private sector development.

1999 - Dow Jones Sustainability Group Indices

In September 1999, Dow Jones Sustainability Group Indexes GmbH (DJSGI GmbH) announced the launch of the first global indices intended to track the performance of the leading sustainability-driven companies.