Big banks have not done enough in the five years since the financial crisis to make themselves more socially responsible corporations, according to a report released Wednesday by a shareholder advocacy group.
Bank of America (BAC), Bank of New York Mellon (BK), Citigroup (NYSE: C), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) all scored 60 or below out of a possible 100 points in a study by the Interfaith Center on Corporate Responsibility. The study measured the seven banks' performance in responsible lending, risk management, executive compensation and political contributions.
"What we see in these findings is a somewhat timid group of banks clustered in the average-to-below-average range with no single institution distinguishing itself as a leader for shareholders in the post-financial-crisis era," Rev. Séamus Finn, vice chair of the ICCR board, said in a press release Wednesday.
The study was conducted between September 2012 and February 2013 using a questionnaire filled out by the banks. The report also collected information through in-person meetings and conference calls with bank officials, companies' corporate social responsibility reports and websites, regulatory filings and watchdog organization databases.
Goldman Sachs was the top-ranked bank of the seven with 60 points, scoring the highest in responsible lending and investment. Bank of New York Mellon was close behind with 59 points, scoring highest in risk management. The two companies tied for the highest score in political-contribution practices along with JPMorgan Chase (which had 57 points overall) and Citi (which had 55 points overall).
Morgan Stanley and Bank of America each racked up 55 points overall. Wells Fargo finished in last place with 51 points, although it scored highest on executive compensation practices.
Bank of New York Mellon had a "good dialogue with ICCR during their fact-finding, as reflected in our receiving its #2 overall score," a company spokesman wrote in an email. "We look forward to continued engagement with them. In our current [corporate social responsibility] report, we focus on several of the same issues, such as market integrity."
Representatives from the other banks included in the report did not immediately respond to emails seeking comment.
Several patterns emerged across all seven banks, according to the study. While the report found that banks had improved risk management in the aftermath of the financial crisis, boosting regulatory compliance and reorganizing management structure to ensure the independence of risk officers, it also identified major areas in need of improvement.
"[W]hile banks report some enhancements in their enterprise risk management, to date we have little or no evidence of the effectiveness of these reforms," Sister Barbara Aires of the Sisters of Charity of St. Elizabeth, N.J., said in the release. "We were further concerned by the banks' lack of transparency around high-risk trading such as dark-pool operations which are conducted anonymously and high-frequency trading which can disrupt market stability through the speed and volume of orders executed within seconds."
Its review of responsible lending and investment included a wide range of activities, including investment of assets and consumer products.
The seven banks generally performed well in efforts to support environmental sustainability. Citi, Bank of America, Wells Fargo and Goldman Sachs each made 10-year commitments worth billions of dollars to invest in renewable energy and other projects related to climate change. But the report recommended that banks step up efforts to influence the behavior of fossil fuel companies and establish environmental, social and corporate governance screens for proprietary assets.
The report singled out Wells Fargo for continuing to offer payday lending products.
Bank of New York Mellon, Goldman Sachs, Morgan Stanley and Wells Fargo each earned high marks for transparency in how they determine executive compensation. The report also lauded JPMorgan, Bank of America and Goldman Sachs for tying compensation to two-year performance rather than a one-year standard. However, the report flagged rising executive pay as a concern, arguing that excessive compensation can encourage risky behavior.
The report found that all seven banks had prohibited the use of corporate funds for election campaigns. But all seven need to provide more detailed disclosure of political contributions and lobbying activities, according to the report.
The Interfaith Center on Corporate Responsibility is a group of 300 faith-based and secular institutional investors with over $100 billion in assets under management.