The growing importance of environmental, social and governance issues is prompting businesses in most industries to at least pay lip service to those subjects. That’s easy. But actually committing to ESG, documenting that commitment and then acting on it is much harder. Valley Bank may be providing a model for doing just that.

The Wayne-based bank recently issued its first ESG report, following the establishment of an ESG Council in 2020 and building on the lender’s annual Corporate Social Responsibility reports. Running 26 pages, the ESG Report outlines the bank’s efforts and ambitions in all three components. “Our financial performance and prosperity are tied directly to the success of our key stakeholders: our customers, investors, associates and community partners,” Valley CEO Ira Robbins wrote in an introduction to the report. “We believe good corporate governance practices that foster diversity and inclusion, environmental stewardship, innovation and social and economic equity will promote sustainability in everything we do.”

The COVID-19 pandemic underscored the importance of good corporate citizenship for many businesses. And Valley was no different. “In the wake of some of the most challenging years in recent memory, our commitments to addressing today’s most prevalent ESG issues have never been more important,” Valley President Thomas Iadanza said in an email. “That’s why we’ve dedicated our resources and leaders to making ESG a priority at Valley Bank.”

Iadanza said the implementation process will be continuous. “While there is no definitive timeline for introduction or adoption of new products or policies, our ESG Council meets weekly to discuss how we develop new products and policies that will help us become more socially responsible and integrate climate risk awareness into our business activities,” he said.

The assessment process will also be ongoing. “Measuring success is a continuous effort. We’ve just started our journey to push climate change awareness and mitigation activities throughout the company,” Iadanza explained. “And even though we’re taking our first steps, we will constantly be pushing forward, evaluating and reporting on our progress, and establishing partnerships that will have a positive impact on local communities.”

Social policy

The report states that Valley “should be part of the solution by harnessing its capabilities to promote inclusive economic opportunity, growth and positive societal impact.” Toward that end, the bank is committed to “promoting affordable homes, inspiring innovation and entrepreneurship, stimulating economic and community development and living our goal of impactful local leadership.”

Specifically, Valley will be assessing its efforts in several areas.

• Residential mortgage loans to low- to moderate- income individuals and geographies
• Multifamily loans in low- to moderate- income census tracts
• Small business loans
• Investments in underserved areas and support of small businesses and the nonprofit sector
• Community development loans with the primary purpose of supporting affordable housing, economic development/ job creation, revitalization/ stabilization of communities and service organizations supporting underserved populations
• Community service activities including volunteerism and board-committee level participation

According to the report, Valley will post the results of these efforts annually.

Environmental policy

The company’s approach to the environment is directed internally and externally.

Internally, Valley said it pays attention to the environmental impact of its office and branch operations. “For example, we have refurbished selected branch offices and when we do so, we seek to refurnish these branches to reduce energy use and encourage and implement recycling programs,” the report states. “We are in the process of optimizing the square footage of our corporate offices and installing LED lighting in our new and existing facilities.”

Externally, Valley said it is “developing lending programs that support environmental sustainability.” Those initiatives include:

• Appointing small business environmental commercial lending officers
• Creating a large-scale renewable energy project finance initiative
• Introducing a product platform that would provide specific incentives and capital for clients using loan proceeds to implement green initiatives
• Supporting hybrid and electric vehicle financing
• Tracking and encouraging climate mitigation lending

Valley is also conducting stress tests involving the effects of climate change. Noting that the bank had some experience with such issues at its Florida operations in 2016, the focus now will be on New York and New Jersey. “Our hypothetical scenario assessed direct impacts to the Bank (e.g., via damage to its real estate holdings), indirect impact (e.g., via damage to its commercial and residential mortgage collateral) as well as staffing and operating losses,” the report states “We realize that in future stress testing, we may need to stress test for more than one climate event at a time.”

Governance policy

The governance section of the report focuses largely on diversity, especially on Valley’s board. That focus “has resulted in 36% of our board being comprised of directors who are female or self-identify as ethnically diverse, reflecting our commitment to diversity and inclusion.”

Cybersecurity is another major area of concern, given the exponential expansion of technology in the banking business. “A major component of our cyber program is sharing and training our associates, customers, industry and business partners on relevant cyber-related topics,” the report notes. “This dissemination of threat information helps to improve our cyber posture and the community as a whole.”

The ESG report makes clear that the bank considers cybersecurity everyone’s responsibility. “Our Cyber program seeks to make cybersecurity programmatic and cultural, while maintaining the principles of confidentiality, integrity and availability of systems and data.”

It would be difficult to overstate the importance of privacy measures in the financial service industry. Valley’s report emphasizes the bank’s efforts in that area. “The privacy team has created an inventory of Personally Identifiable Information (PII) which includes data stored in existing internal and external repositories,” according to the report. “A Privacy Impact Assessment program is in place to identify new sources of PII and ensure that relevant privacy controls and procedures are built into new systems following the Privacy by Design methodology.”

Iadanza suggested that issuing an ESG report like this one is rare for banks of Valley’s size. Nonetheless, he said it has been welcomed by stakeholders. “We have received very positive feedback from our customers, associates and community partners so far and plan to release an updated ESG report on an annual basis,” he said.