gssbsecretariat@globalreporting.org

Item 04 – GRI Sector Standard
Project for Financial Services –Project proposal
For GSSB approval
Date

30 January 2023

Meeting

16 February 2023

Description

This document sets out the project proposal to develop Sector Standards for thebanking, insurance, and capital markets sectors.
The Standards Division recommends producing three standards for banking,insurance, and capital markets under a single project, titled ‘GRI Sector Standard
Project for Financial Services’. This project responds to the commonality of these
sectors as financial asset holders and investors in other sectors and the need totake a consistent approach to report on impacts that are relevant to anorganization as a result of this type of business relationship.
In accordance with the Due Process Protocol, a draft project proposal wassubmitted to the GSSB and discussed in October 2022. Subsequently, the draft
proposal was circulated to the GRI Board and Stakeholder Council for feedback.
No feedback was received from either body. Additionally, since October 2022,
consultations with various stakeholders have taken place, providing the basis forcertain changes to the final project proposal.
Based on stakeholder feedback, it is proposed that payment providers areincluded within the banking sector, along with investment banks, which wereoriginally included within the capital markets sector in the draft project proposal.
Furthermore, stock and commodity exchanges, as well as rating agencies, will beremoved from the capital markets sector and the project's scope. It is intended forsuch organizations to be included in future Sector Standards. Similarly, real estate
investment trusts (REITs) will be excluded from this project's scope, with theintention to include them in a future Sector Standard concerning the real estatesector.
Please note: The commencement date of this project is projected for Q2 of 2023.
A finalized start date is subject to resource availability.

This document has been prepared by the GRI Standards Division and is made available to observers
at meetings of the Global Sustainability Standards Board (GSSB). It does not represent an official
position of the GSSB. Board positions are set out in the GRI Sustainability Reporting Standards. TheGSSB is the independent standard setting body of GRI. For more information visit
www.globalreporting.org.

© GRI 2023

Contents
Project background ................................................................................................................................. 3
Sector overview ....................................................................................................................................... 3
Sustainability impacts .............................................................................................................................. 7
Project objectives .................................................................................................................................... 8
Division of responsibilities ...................................................................................................................... 8Timeline ................................................................................................................................................... 9

1Project background2
3

In February 2019, the Global Sustainability Standards Board (GSSB) approved the GRI Sector
Program to improve clarity and consistency in sustainability reporting.

456

Standards will be developed for the banking, insurance, and capital markets per the list of sectors
approved by the GSSB in November 2020. These three Standards will be developed within thebounds of one project.

78The impacts that banking, insurance, and capital markets contribute through their holding of financial
assets are similar and, as such, should be consistently reported across the three sectors.

910

Similar stakeholder expectations also exist across the three sectors, and the institutions in whichthese stakeholders are found cover all financial services industry sectors.

111213At the same time, banking, insurance, and capital markets carry out specific activities and operate
under different regulatory regimes. For this reason, each sector should be given enough room to tailor
the reporting recommendations to their needs.

14Sector overview

151617

Financial services organizations are intermediaries between all other economic actors, channelingmoney from savers to borrowers, facilitating payments, and matching people who want to lower risk
with those willing to take on that risk.

18192021

The financial services industry is a substantive part of the economy, contributing about 5% of GDP in
the European Union and more than 8% in the United States. However, its real importance lies in its
central position in the economy, where few activities could function without credit, insurance, capital
markets, or payment services.

22Divisions within financial services

2324
252627

There is a range of different sub-sectors and activities within financial services. No single
classification captures all this variety, partly because the criterion to differentiate one activity from theother is often rooted in regulations that change from country to country and evolve over time. There isalso a fair amount of integration between the sectors, with many large asset managers owned byeither banks or insurance companies.

28293031

It is proposed to organize financial services into three sectors: banking, insurance, and capitalmarkets. This grouping is based on similar sustainability impacts and the way these organizations areinvolved with impacts, namely through investment in other sectors. Below is a detailed description ofthe three sectors.

32

It is proposed that these Standards be titled as follows:

33•

GRI 17: Banking Sector 20XX

34•

GRI 18: Insurance Sector 20XX

35•

GRI 19: Capital Markets Sector 20XX

36
37

The scope and name of these standards may deviate from this proposal following recommendations
from the technical committees or other input gathered through the project.

38

Banking

39

Banks are institutions that mainly take in deposits and provide loans.

40
41

It is proposed that the Sector Standard for banking will apply to organizations whose primary purpose
is one or more of the following activities:

42•

Banking43
44•

Consumer finance, including credit card services, mortgage lenders, microfinance institutions,and personal and student loan services

45•

Investment banking

46•

Payment providers

47
48
49

Investment banks facilitate complex and large transactions for corporate clients, such as mergers andacquisitions, IPOs, and debt financing. Quite often, investment banks also offer typical banking
services to retail clients.

50
51

Payment providers are inextricably linked to banking and are increasingly offering simple banking
services, such as short-term consumer credit.

52
53
54
55

Given the significant overlap and integration between financial technology (fintech) and payment
providers, it is important to clarify that the banking sector will not include fintech companies thatprimarily develop enabling technologies (e.g., software products) for the financial services sectors.
Such companies will form part of future Sector Standard(s) covering software.

56
57
58

There are more banks than other financial institutions; they are also larger on average and have ahigher public profile. Most people utilize a range of financial services offered by banks, which may
have substantial and direct impacts on their welfare.

59

Table 1: Proposed sector key for the Banking Sector Standard
Classification
Standard

Classification
No.

Classification Name

GICS®

4010

Banks40201050

Commercial &Residential Mortgage
Finance

40201060

Transaction &Payment Processing
Services

40202010

Consumer Finance40203020

Investment Banking &Brokerage

3010

Banks

30201020

Consumer Lending

30201025

Mortgage Finance30202000

Diversified Financial Services

641

Monetary intermediation

6491

Leasing

ICB

ISIC

SICS®

6492

Other credit granting

FN-IB

Investment Banking & Brokerage

FN-CB

Commercial Banks

FN-CFConsumer Finance

FN-MF

Mortgage Finance

60
61
62
63

Note: Tables 1, 2, and 3 list the relevant classifications from external classification standards,
specifically the International Standard Industrial Classification of All Economic Activities (ISIC),
Industry Classification Benchmark (ICB), Global Industry Classification System (GICS), and SICS
Sustainable Industry Classification System® (SICS®).164

Insurance

65

Insurance organizations offer risk management in the form of insurance contracts.

66
67

It is proposed that the Sector Standard for insurance will apply to organizations whose primary
purpose is the provision of the following products or services:

68•Life insurance69•Non-life insurance, including:70oHealth insurance71oTravel insurance

72

oProperty insurance73

oMotor, marine, aviation, and transport insurance

74

oCasualty and accident insurance

75•

Reinsurance

76•

Insurance intermediaries, for example agents and brokers

7778

Insurance intermediaries, such as agents and brokers, while not providing insurance policies, caninfluence the way that the insurance sector operates and are thus included in this sector.

7980
8182

Insurance organizations can have distinct sustainability impacts because of the specific nature of theirproduct. They can help or hinder the development of certain activities by changing the conditions
under which they offer insurance. Their business model is directly affected by the physical effects ofclimate change.

83

Table 2: Proposed sector key for the Insurance Sector Standard
Classification
StandardClassification
No.

Classification NameGICS®

4030

Insurance

ICB

3030

Insurance

1 Sustainable Industry Classification System® or SICS® is the classification system of SASB.

ISICSICS®

651

Insurance

652

Reinsurance

662

Activities auxiliary to insurance and pension
funding

FN-IN

Insurance

84

Capital markets

8586Organizations in this sector provide or facilitate the investment of money in order to generate financial
returns.

87

It is proposed that the Sector Standard for capital markets will apply to:88•

Asset owners

89•

Asset managers

90•

Pension funds

91•

Sovereign wealth funds

92

Table 3: Proposed sector key for the Capital Markets Sector Standard
Classification
Standard

Classification
No.

Classification Name

GICS®

40203010

Asset Management & Custody Banks

40203030

Diversified Capital Markets

30202000

Diversified Financial Services

30202010

Asset Managers & Custodians

642

Holding companies

643

Trusts6499

Other financial services activities

653

Pension funds

6619

Other activities auxiliary to financial services

663

Fund management

FN-AC

Asset Management & Custody Activities

ICBISICSICS®

93
94
95
96

Table 3 captures the variety of organizations that fall under this sector. The key criterion to groupthese organizations is that their main sustainability impact happens through the provision of capital toother economic sectors. Asset owners and managers make decisions on allocating capital towards
more or less sustainable activities.

97
98
99

Banks and insurers also have substantial sustainability impacts through capital allocation to otheractivities, which should be treated consistently across the three financial services sectors. This is thekey reason for proposing to develop the three standards under a single project.

100101102103

Based on various stakeholder consultations, it is proposed that stock and commodity exchanges,
rating agencies, and real estate investment trusts (REITs) be excluded from this project's scope. It isalso proposed that investment banking be included in the banking sector rather than in the capital
markets sector.

104

Sustainability impacts

105106
107
108

The key criterion for prioritizing sectors is their sustainability impacts. This takes into
account the significance of the sector’s impacts, considering their scale, scope, character, andlikelihood. The criterion also considers the sector’s size, worldwide distribution, and the number oforganizations from that sector that can use GRI Standards.

109
110
111

Based on this criterion, banking, insurance, and capital markets were selected because of theircentral role in facilitating all economic activities, which translates into a crucial responsibility forsustainability impacts across all sectors.

112
113
114
115

When considering the sustainability impacts of these sectors, it is useful to distinguish between thosecaused by organizations directly as a result of their activities and those to which organizations
contribute or are directly linked through their capacity to allocate capital and provide insurance
services.

116
117
118

Examples of direct impacts include those that organizations have on their workers and customers, aswell as those related to their capacity to evade tax or host corrupt activities. The Standards Division’s
research has identified impacts that can be material in these sectors as follows:

119•

Financial inclusion

120•

Diversity and equal opportunity

121•

Consumer privacy

122•

Anti-corruption

123•

Fair advice and transparent information

124•Labor conditions

125
126
127
128

Impacts resulting from business relationships are broader because financial services organizations
have business relationships that span all sectors of the economy. Because these organizations candetermine the implementation of many economic activities through the allocation of capital andprovision of insurance services, these impacts are larger in scale.

129
130
131
132
133
134
135

Climate change receives the most attention of all impacts that organizations in these sectors
contribute to through capital allocation. The Paris Aligned Investment Initiative (PAII), one of the most
relevant institutions in this field, states that the financial industry's role in the climate transition is todecarbonize investment portfolios and increase investment in climate solutions in a way that is
consistent with a Net Zero emissions future. This project will consider other impacts beyond climatechange when providing recommendations for organizations in these sectors to report on the impacts
they contribute to through capital allocation.

136
137
138
139
140

The impacts mentioned in this section provide a first indication of the scope of issues covered by theproposed project. However, the topics recommended for inclusion within the Sector Standards forbanking, insurance, and capital markets will be determined by a multi-stakeholder process inaccordance with the Due Process Protocol and may diverge from those contained within this project
proposal.

141

Project objectives

142
143
144

The primary objective of this project is to develop three Sector Standards that improve thesustainability reporting of banking, insurance, and capital markets organizations, making reporting
comprehensive and consistent across the sectors.

145

These Sector Standards will:

146
147
148
149
150

•
••Identify and describe the likely material topics for a reporting organization in the banking,insurance, and capital markets sectors based on their most significant impacts.
Provide evidence and authoritative references for these topics to assist organizations inidentifying if they are material for them.
Identify and list appropriate disclosures for reporting on those topics.

151
152
153

As per the 2021 revision of GRI Universal Standards, organizations in the banking, insurance, andcapital markets sectors that want to report in accordance with GRI Standards will be required to usethe applicable Sector Standard.

154

Recommendations by the technical committees may also be made regarding the following:

155
156
157
158
159

••
•
•

The scopes and names of each Sector Standard.
The most effective way to include reporting on impacts that contributed to or directly linked via
business relationships, such as through capital allocation, in Sector Standards.
Other considerations that may be relevant to Sector Standards for related sectors.
Revisions or updates to other GRI Standards.

160
161

Impacts identified within this project for which no GRI Standard exists will be assessed and prioritizedby the GSSB for future GRI Standards development.

162

Division of responsibilities

163

Three technical committees (TCs) will be formed to support the development of each Standard.

164
165

It is proposed that each TC define the impacts caused by organizations' activities in their respective
sectors and identify the relevant reporting for these.

166
167
168
169

Given the overlap across the three sectors regarding investing in other non-financial sectors, the TCs
will cooperate via a cross-sector exchange. This cooperation will help define the approach andreporting relevant to the impacts organizations have through capital allocation and other impacts thesectors have in common.

170
171
172

The cross-sector exchange will also provide an opportunity to identify and discuss any misalignment
between the three sectors' scopes and the descriptions and reporting identified for likely material
topics common to all.

173
174
175

Each TC will make the final recommendations on their respective Standard's development. However,as part of their Terms of Reference, they will be obliged to work towards alignment across the threeStandards.

176
177
178

This arrangement intends to represent all stakeholders in the process, a coherent approach acrossthe three sectors in describing and identifying relevant disclosures, and an efficient division of labor toproduce three standards.

179
180
181

The Standards Division will draft the Standards, and the GSSB will have oversight and final
approval before release. The Standards Division will ensure coherence between the Sector Standards
for banking, insurance, and capital markets and any Standards approved or under development.

182

The project will be conducted in accordance with the GSSB Due Process Protocol.

183

Timeline

184
185
186
187
188

The commencement date of this project is projected for Q2 2023. A finalized start date is subject toresource availability. Given that this project will develop three Sector Standards, it is expected that it
will have a longer duration than other Sector Standard projects. Table 2, on the following page,
outlines the anticipated project duration. Predicted dates of key milestones will be confirmed onceknown.

Barbara Strozzilaan 336
1083 HN Amsterdam
The Netherlands
gssbsecretariat@globalreporting.org
Table 2: Estimated duration of Sector Standard Project for Financial Services 2189

2 Project scheduling changes may occur over the course of the project, including extensions to the duration of project due to approval processes or other circumstances.

This document has been prepared by the GRI Standards Division and is made available to observers at meetings of the Global Sustainability Standards
Board (GSSB). It does not represent an official position of the GSSB. Board positions are set out in the GRI Sustainability Reporting Standards. The GSSB isthe independent standard setting body of GRI. For more information visit www.globalreporting.org.

© GRI 2023