From the Group chief executive

From the Group chief executive

If anyone needs convincing of the importance of taking a sustainable approach to business, then the extraordinary dislocation and disruption in financial markets in 2008 provided dramatic proof.

Banks with unsustainable business models collapsed or were rescued by governments. The sudden reversal of unsustainable levels of leverage across many financial markets caused immense damage to the real economy. Not surprisingly, public trust and confidence in banks and political support for the industry has declined sharply.

Given our conservative business model and our strategy to continuously focus on the basics of banking, Standard Chartered has weathered the storm relatively well. We have not been unscathed, but we have continued to be open for business for our customers, and have continued to grow profits.

Yet we are far from complacent. The market environment remains volatile and challenging. The process of correcting the unsustainable macro imbalances, the over-leverage and the excess liquidity, is far from over. In 2009, almost every economy in the world will face slower growth, rising unemployment, and corporate failures. Our markets in Asia, Africa and the Middle East are likely to do better than those in the West, but they are being significantly affected.

“Our commitment is to continue to focus on building a sustainable business as a bank.” Peter Sands,
Group chief executive

In this context, our sustainability agenda must take into account the fundamental task of re-establishing confidence and trust in banks whilst continuing to maintain an unwavering focus on addressing the longer-term challenges that the world faces. We need to acknowledge what has gone wrong. We need to articulate the essential role banks play in the economy. We need to demonstrate that the way Standard Chartered works was – and is – sustainable and creates value for customers, investors and society as a whole.

For the economy, banking is like oxygen: taken for granted when it’s there; a disaster when it fails. Banks play a number of critical roles including enabling payments, securing savings and providing credit. By borrowing short and lending long, the banking system enables the rest of the economy to do the opposite, which empowers consumers and fuels companies.

Banking inherently involves taking risk. This does not necessarily create a problem, as long as the risks of each activity are well-managed and appropriate to the economic value of such activities. Yet over the last few years, many banks have lost sight of the risk-return trade-off, both for themselves and for society as a whole. Some of what banks have been doing – the products, the business models – have turned out to be unsustainable.

So one lesson from this crisis is that every bank needs to ensure its strategies, business models and products are sustainable. This does not mean that every bank has to be equally successful, but the system of regulation needs to be able to anticipate and catch the failures before they become catastrophic.

Another lesson is that every market is interconnected. The notion of ‘decoupling’, that somehow Asia would be immune to the travails of the West, has been demolished. This means that responses to the crisis need to be co-ordinated. Hence the importance of the G20 process launched in Washington in November 2008.

At Standard Chartered, we do not pretend to have foreseen the crisis. We knew and said there was too much leverage and that risks were being under-priced. We discounted the ‘de-coupling’ argument. We eschewed most of the more ‘exotic’ aspects of banking. We never took liquidity for granted. Yet even so, we were surprised by the pace and ferocity of events.

Our commitment is to continue to focus on building a sustainable business as a bank, creating value for our shareholders, supporting our customers, contributing to the economy as a whole, and being a force for good in the communities in which we live and work. We will face tough decisions in 2009, since the economic turmoil will bring many challenges. Yet we also see many opportunities, to deepen our relationships with customers, to win market share and to increase our impact. We continue to invest in our markets to build a sustainable future. This is the way we do business – and has been for over 150 years.

“We continue to invest in our markets to build
a sustainable future.” Peter Sands,
Group chief executive

Re-establishing the sustainability of banking is a top priority for 2009. But fixing the global financial system must not be done in isolation - it is just one important aspect of creating a more sustainable world economy.

Our markets are those most adversely impacted by social and environmental challenges. These challenges will persist long after we return to economic stability and have the potential to cause greater long-term instability. They require attention now. So, while the crisis dominates headlines, there is a danger that society forgets the hundreds of millions of people who live in poverty, lack the basic necessities for life, such as food and healthcare, or face the impact of environmental degradation and climate change that threaten livelihoods and economies. These issues are exacerbated in this economic climate. The underprivileged in the emerging economies of Asia, Africa and the Middle East are also the most vulnerable in the economic downturn; a strain on the flow of development funds and remittances is threatening the wellbeing of many.

So our approach to sustainability focuses both on continuing to manage our core banking practices responsibly and on the seven specific areas which have been at the heart of our sustainability strategy for some years, outlined below.


Responsible selling and marketing

Many people have seen investments drop as a result of the crisis. The market dislocation has prompted increased customer and regulator awareness around the mis-selling of financial products. Both threaten to undermine the long-term wellbeing of the financial services sector and highlight how responsible selling and marketing has to be at the heart of the basics of banking. At Standard Chartered, we have always taken the protection of customers’ funds seriously, as well as endeavouring to match individual customers’ risk profiles to the products offered to them.

Access to financial services

Improving access to financial services is a vital part of promoting economic growth and helping bring people out of poverty. A continuing priority for us is to stimulate grassroots enterprise and we are on target to meet our $500 million Clinton Global Initiative commitment to provide access to microfinance. To date, we have provided $385 million of new credit lines and financial instruments to 52 partner microfinance institutions in Africa and Asia and provided technical support to increase their effectiveness.

But merely extending lines of credit can never be the whole solution. Financial literacy and capacity-building support is also critical. In May 2008, we made a commitment to the UK Government’s Millennium Development Goals Call to Action by launching a new programme which will include innovative financial products, skills development, business mentoring and research to help the crucial small and medium-sized enterprise (SME) sector fulfil their growth potential.

Tackling financial crime

To effectively manage risks from financial crime, our Group Financial Crime Risk Committee is responsible for reviewing current and emerging financial crime risks and ensuring there is an appropriate risk management strategy in place to address those risks. In 2008, we launched a new Group strategy to tackle money laundering and extended the use of our monitoring systems for identifying suspicious transactions.

Community investment

Society is still failing to win the war on HIV/AIDS, with 6,800 new infections daily. To meet our commitment to educate one million people on HIV and AIDS by 2010, we extended our education programmes to SME customers in Africa, as well as to global corporations and to students around the world. The challenges of preventable blindness and malaria also threaten lives and economic prospects across our markets. In October 2008, under the banner of ‘Seeing is Believing – A New Vision’, we made a commitment to provide eye-care services to 20 million people in 20 cities by 2015. Nets for Life, a programme to tackle malaria in Africa, has distributed over one million anti-malarial nets since 2006. We have extended our commitment to supply a further five million nets by 2013.


Protecting the environment

We have all seen how a lack of international accord on the global financial system results in disarray. Similarly, it would be imprudent to try to tackle climate change single-handedly. An international agreement for action must be achieved in 2009 and we will continue to play our part as a member of The Climate Group and the Carbon Disclosure Project on climate change issues.

We are conscious of our responsibility to cut the carbon dioxide emissions caused by our operations and have exceeded our reduction targets for the period 2006 to 2008. We work with employees, customers and other stakeholders to raise awareness, stimulate action and reduce their impact on the environment. In 2008, we began implementing our revised environment strategy with ambitious targets for 2011 and beyond.

Sustainable finance

By 2050, the world will need to generate significantly more energy than it does today but with half the carbon emissions to avoid catastrophic climate change consequences. As fuel prices continue to fluctuate and credit remains tight, clean energy projects may attract less investment. At Standard Chartered, we have already financed over $3 billion of renewable energy and clean technology projects and remain committed to growing our business further. Our financing of the SinAn Gun solar photovoltaic project in Korea is an example, generating 25 megawatts of electricity and the largest photovoltaic plant in Asia.

We participated in a coalition of five leading financial institutions to shape the Climate Principles, launched in December 2008. It is vital that we implement the principles across our business. In 2008, we finalised a range of ‘Position Statements’ that set out our environmental and social standards in lending to customers on a broad range of sensitive issues, from climate change to child labour and from bio-fuels to ship-breaking.

Great place to work

Our employees have tripled in number over recent years. Our culture has helped fuel our success but it could have become a victim of our growth as we assimilated many new people into the Bank. During 2008, we refreshed awareness of our values as a guiding compass of responsible behaviour, which I believe will sustain our success in future, along with the talents, diversity and values of our people.

As the debate continues over the appropriate level of regulation for business in response to the economic crisis, it is clear to me that it is impossible and inappropriate to try and regulate for every eventuality. For this reason, nurturing a strong corporate culture of responsibility and ethics and reinforcing our values remain a top priority.

Some commentators have argued that the crisis, in part, stems from banks’ remuneration policies which have helped breed cultures of excessive risk-taking. We have always taken a view that our remuneration policy should support and drive our business strategy and reinforce our values. This includes incentives aligned with shareholder interests and long-term profitability, taking into account overall risk and cost of capital. We review remuneration policy on a regular basis against significant regulatory developments and market practice.


Now, more than ever, society needs well-governed banks which support their customers with their daily banking needs of savings and the provision of credit and institutions who are responsibly aware of the role that they play in our communities. While I am proud of the progress on our sustainability agenda in 2008, I recognise there is much more to do. As a leading international bank, we recognise the importance of helping to re-invigorate growth by supporting our clients across Africa, Asia and the Middle East in new and improved ways of doing business, as well as helping address some of the world’s most pressing social and environmental challenges.

Peter Sands Signature

Peter Sands,
Group chief executive
3 March 2009