The Box

• Global banks' behaviour has shifted with fossil fees now outpacing green. Syndication fees have risen quarter-on-quarter, with fossil up +252% and green +62%. This leads to the net figure turning negative, with USD-19mn net fees in the past year for large banks.

• Fees have moved in the opposite direction in Asia-Pacific. In ASEAN, the average net fee ratio has continued to rise and, in Japan, all banks have a positive net figure. 

Banks earn syndication fees for arranging bonds and loans for clients. Using their reputation in the market, banks help to attract investors to new issuances. 

Yet this significant fee-generating activity often falls outside the scope of banks' sustainability policies, which tend to focus on direct lending.

Putting a bank “in the box” is a recognised market practice, in which dealers are removed as a trading counterparty, and effectively sanctioned by investors for poor behaviour. Investors can use this approach to promote sustainable business at their banks. By directing business to those banks with syndication activity that aligns with their climate and nature objectives, investors can use their dealings with banks to incentivise change.

Steps for investors

1. Generate a league table of banks’ syndication activities, using AFII data or your preferred measure for aligned activities
2. Communicate to the bottom tiers that they are ‘at risk’ from fee-generating activity exclusion
3. Execute and communicate a de-selection for the poorest performing banks
4. After a pre-set period, repeat the process. Feedback, given within single compensation cycles, will better drive short-term behaviour