Corporate Responsibility
Leadership indices and benchmarks
Our strategy sets us apart from our competitors. This has been recognised by our inclusion in key leadership indices. We are one of only two UK banks in the Global 100 Most Sustainable Corporations in the World. We are a member of the Dow Jones Sustainability Index. Last year we increased our score from 94% to 97% in the Business in the Community CR Index. In the 2006 Accountability Rating, we achieved a ranking of 9th place globally. We were placed in the Carbon Disclosure Project Climate Leadership Index. We are one of only 2 UK banks to receive the AAA highest rating in the Innovest global sustainability review of banking.
Governance
Our governance structure ensures that social, environmental and broader reputation issues are fully managed. The Way We Do Business (‘WWDB’) is reviewed annually by the Board and specific reviews take place on issues such as environmental management and community investment. Finance Director Phil Hodkinson has Board responsibility. The WWDB Action Group, chaired by Phil Hodkinson and with senior representation from all divisions, drives CR strategy throughout the business. A framework of steering groups also help achieve this, including the:
- HBOS Communication Group, chaired by Group Chief Executive Andy Hornby;
- Diversity Committee, also chaired by Andy Hornby;
- Financial Inclusion Committee, chaired by Retail Chief Executive Benny Higgins; and
- Climate Change Group, chaired by Managing Director of Intermediary Distribution and Specialist Banking, Philip Grant.
Stakeholder engagement
Consultation with a wide range of stakeholders is crucial to our continued success. During 2006 we held a series of meetings with consumer groups to swap agendas, share ideas and identify areas for cooperation and change. Regular meetings were held with consumer groups in the UK and in Brussels including Which?, Citizens Advice, National Consumer Council (‘NCC’), FIN-USE, and Citizens Advice Scotland. The Group’s consumer engagement programme culminated in a week of events to promote National Consumer Week (November 20-25).
Customer strategy
Market leading products
Our strategy of offering excellent value, clear products is delivering for customers and shareholders. Our High Interest Current Accounts, offering an interest rate 60x that of most high street banks; our Moneyback Current Accounts, offering 1% moneyback on the first £10,000 of debit card purchases per year; and our standard current accounts have been very popular with our share of new bank accounts increasing to 19% in 2006 from 16% in 2005.
Under the Government’s Shared Ownership Scheme, Halifax customers who are shared owners enjoy the same access to our products and services as other customers. We are one of just four mortgage lenders partnering with the Government on its Open Market Homebuy scheme, a shared equity scheme designed to help first time buyers, key workers and social tenants get on the ownership ladder. The scheme is the first time both government and lenders are taking responsibility for sharing equity in properties to allow people to enter the housing market.
Responsible lending
In March, we became the first issuer to feature a personal summary box on credit card cheques providing details about interest rates, cheque fees, and legal safeguards. We were the first bank to introduce a summary box on Payment Protection Insurance literature so customers can easily see what the main benefits and exclusions are. From early 2007 we became the first major UK estate agency to introduce summary boxes on agency agreements.
HBOS has been sharing full data on the vast majority of Halifax and Bank of Scotland products for some time and has campaigned for wider participation across the industry. In March 2006 we began work on a pilot with other high street banks to improve further lenders’ knowledge of customers’ indebtedness.
Our environmental and social risk management extends to commercial lending. In 2006, we endorsed the revised 2006 Equator principles which require social and environmental risk assessments of large project finance deals.
Financial inclusion
We opened almost 65,000 social banking accounts during the year. We have over 50% of all the UK’s social banking accounts - over three and a half times as many as our closest competitor. Many of our social banking customers progress to full facility current accounts offering credit through an overdraft facility; since 2001, we have upgraded 191,000 social banking customers to full facility accounts.
31% of our social banking customers in deprived areas also have a savings account with us. HBOS is the only bank to pilot the Government’s Savings Gateway. The pilot concluded at the end of 2006. It has been successful with over 22,000 new savings accounts opened; the independent report on the pilot, commissioned by the Treasury, is due to be published in early 2007.
In July we were one of the first major banks to commit to install new free ATMs in areas of need – with up to 100 in our heartlands across Scotland and the North of England. All of our 2,750 ATMs are free to use. We were the first UK ATM provider to feature green labels on our ATMs advising customers they would not be charged for withdrawing cash.
Colleague strategy
Our continued success relies on high performance from our colleagues. We recognise that this high performance is sustainable only if we keep the commitment we have made to our 74,000 colleagues in our statement of business principles, called The Way We Do Business.
The HBOS People strategy is designed to drive a high degree of engagement, flexibility and motivation amongst our colleagues. The Way We Do Business is integrated into our Leadership Commitment and from 2006 25% of senior managers’ bonus outcome will be based on personal performance against the Commitment.
The HBOS Total Reward strategy aligns exceptional performance with exceptional rewards, and colleagues are encouraged to share the success of HBOS through share schemes. High employee share ownership aligns colleagues’ aims with those of our shareholders. During 2006 we offered our colleagues three share schemes, including offering all colleagues free shares – we are one of a very small number of companies to offer such a programme. At the end of 2005 we announced our plans to eliminate the deficit in our final salary pension schemes over a ten year period. By the end of 2006 we had invested an extra £800m.
We proactively engage with colleagues on how we are delivering against the WWDB. It is the starting point for people joining HBOS. The strategy is paying off, with 73% of colleagues speaking highly of HBOS as an employer compared with 56% industry-wide.
Society strategy
Community
HBOS is a significant generator of wealth across the UK and, in particular, around our heartlands in Yorkshire and Scotland. We are one of the largest payers of corporation tax in the UK, paying £1.3bn in tax and National Insurance in 2006. We employ 65,700 people in the UK and 74,000 worldwide. Over 31,400 of our colleagues are in Yorkshire and Scotland. Our total community investment figure for 2006 amounted to £44.2m.
The HBOS Foundation, a registered charity funded by HBOS, drives volunteering and charitable work. In 2006, HBOS’s contribution to the Foundation doubled from £4m to £8m. The main criteria for national projects delivered by the Foundation are financial literacy and money advice. Financial literacy projects are organised around the Financial Services Authority’s national strategy and focus on seven priority areas: schools, young adults (16-25); work; families; borrowing; retirement; and advice. In 2006 the Foundation gave £2.07m in national and regional grants.
In 2006, HBOS colleagues, supported by matched funding from the HBOS Foundation, raised over £2.5m for the three Million £ Challenge charities (I CAN, Crisis and Leonard Cheshire). Our matched funding scheme also raised a total of £2.08m to support over 500 charities. The number of colleagues helping their local communities through volunteering has continued to grow from 5,000 in 2005 to over 7,000 in 2006. In total £15.4m has been raised via the Foundation over the last four years.
HBOS invests in sponsorship partnerships that make a tangible difference to the lives of young people in our heartlands of Scotland and Yorkshire. Last year, over 70,000 young people were able to take part in a new sports or arts experience, over 65% of whom were from socially disadvantaged areas. Bank of Scotland Midnight League programme, one of our community football initiatives, reached over 3,500 young people in 18 leagues in Scotland and 3 leagues in Yorkshire. During 2007, we plan to more than double these numbers to 10,000 young people.
Environment
We are very conscious of the commercial advantage that can be achieved through environmental management, as well as regulatory trends that create a need for companies to have well developed risk strategies in place. Our strategy looks well beyond our direct impacts.
Climate change
- In 2006 we signed a two year contract for 100% renewable electricity, drastically reducing our carbon footprint. We ran an awareness programme among our staff in association with the Energy Saving Trust, leading to 20 staff having home energy makeovers. We presented at the Association of British Insurers’ annual climate change insurance conference and we sponsored a climate change lecture delivered by Al Gore, former US Vice President focusing on the risks posed by climate change. During the year a Climate Change Steering Group was set up specifically to look at the opportunities and risks for our products and services. The Steering Group will report to the HBOS Board in 2007.
Sustainable housing
- As the UK’s biggest mortgage lender, one of our largest impacts on the environment relates to the homes our customers buy. Halifax continues to stand out in our flooding policy in three key areas: we are the first (and so far only) lender and home insurer to cover all of our 1.8 million homeowner customers against flood risk until 2008; customers who invest in new flood skirt technology receive a 20% discount on their annual premium; and if the flood skirt is subsequently used to prevent flooding, customers will be rewarded by the Halifax with a cash payment of £2,000. In addition, a five year fixed preferential rate mortgage offering has been made available only to World Wildlife Fund approved builders, and we are the only bank operating in this space.
Asset management
- Our asset management business, Insight Investment helped develop the Investor Statement on Climate Change. The Statement, which follows the United Nations Principles for Responsible Investment (‘PRI’), requires signatories to incorporate climate change risks and opportunities in their investment analysis and selection. Insight Investment is a sponsor of the PRI, as well as a member of the steering committee and a founding signatory to the principles.
- The Responsible Investment team at Insight ensures that environmental management is given sufficient weighting in all our investment decisions and works with companies to explore the steps they are taking to mitigate their risks. Insight also offers two “green funds”; the Evergreen Fund, investing globally and the European Ethical Fund, investing in UK and European companies.
Paper-free banking
- By the end of 2006 over one million banking customers had registered for the Halifax and Bank of Scotland online paper-free service - more than 60% of HBOS online customers. The initiative is very popular with customers. Not only is it more environmentally friendly than regular paper statements, it is also more secure and more convenient.
Prospects
We are conscious of the developing regulatory landscape especially with regard to financial inclusion and climate change. Both these areas will continue to provide opportunities.
HBOS has already implemented many of the measures recommended in the Treasury Committee reports on financial inclusion and in 2007 HBOS will continue to work alongside the Government and the financial services industry on increasing financial inclusion. We will continue to roll out our branch and ATM expansion programme. HBOS is currently the only major bank to commit to producing an annual detailed financial inclusion report in addition to annual corporate responsibility reporting.
HBOS is well positioned for 2007 in terms of climate change impacts and the increasing need for transparency. We have signed a new two year contract for Ofgem-accredited, Climate Change Levy exempt renewable energy and have ambitious targets for energy use, water use and waste recycling.
HBOS CR Report
More information about our approach to Corporate Responsibility is available in our separately published HBOS Corporate Responsibility Report.
