The financial sector is in need of ethical leaders. And it has one in Fabio Barbosa, who is using his long-standing experience in sustainability to forge the future for Brazil’s third largest bank

Fabio Barbosa likes to buck the trend. When his fellow bankers were leveraging themselves to the hilt, he was banging on about non-financial risk evaluation. As other banks invited in the latest market gurus to address their boards, he called in NGO leaders and environmentalists.

His commitment to long-term, responsible banking is not new. More than a decade ago, he presided over Dutch bank ABN Amro, which set a course to become “a new bank for a new society”. He took that same mission to Banco Real in 1998, following its acquisition of ABN Amro. As Banco Real’s chief executive, he oversaw a number of banking firsts, mostly notably in environmental risk analysis techniques.

Now he is focused on a new challenge. In October 2007, Banco Real was incorporated into Spanish banking giant Santander. Barbosa remained as head of the new outfit’s Brazilian operations. His goal is to see the resulting alliance become the “best bank in Brazil”.

The hallmarks of past experience are plain to see. As before, sustainability comprises his guiding light. Barbosa is a banker through and through. To be the best means generating the highest returns for shareholders. But it also means becoming a “reference for society”. Not a standard banking notion.

Not just about profit

The idea that profits and sustainability can sit side by side took his new colleagues at Grupo Santander Brasil a while to accommodate. To help matters along, Barbosa held weekly sessions with his senior management team to thrash through the merged entity’s mission and values. This was no impersonal conversation. Managers’ own ethical viewpoints were sought and Brazil’s social reality interrogated.

Barbosa applied the cold hard facts as well. In case after case, he demonstrated how companies that had a good social and environmental risk profile performed better over time. Low risk equals long-term returns. It is a formula his fellow bankers were quick to appreciate.

He cites the timber industry to make his point. Should Grupo Santander Brasil lend to a company that is cutting down the Amazon? Turn the question around, he says. Will such a company be doing business five years from now? “The straight answer back was ‘of course not’.”

Any initial resistance from the new team at Grupo Santander Brasil to the blending of sustainability and profit stopped there. “In reality, there are far fewer true dilemmas than false dilemmas,” he remarks. He’s fond of such management nuggets. “We live in the world of ‘and’, not in the world of ‘or’,” runs another.

Embedding such thinking across the Brazilian bank became the next challenge: the “how” of sustainability, as Barbosa puts it, rather than the “what”.

Again, he has the lessons of Banco Real’s change programme on which to draw. He admits it wasn’t easy. With over 50,000 employees, Grupo Santander Brasil presented a different order of magnitude. But a good implementation strategy is a good implementation strategy, whatever the size. And Banco Real boasted one of the best.

At its centre lay training. Educating top-level management in the merged bank’s rejigged sustainability policies and practices topped the list. Over a five-month period, around 1,500 senior employees from across its corporate business took part in customised workshops. A separate training programme was designed for directors and managers in the bank’s retail network. For lower level employees, there was a combination of onsite and online training.

Sharing information with people outside the bank is also high on Barbosa’s list. “Dialogue” is a word that crops up half-a-dozen times in his conversation with Ethical Corporation. He has devoted much of his current three-year presidency of the Brazilian Federation of Bank Associations to the same theme.

Battered reputations

And the recent banking crisis played into his hand. The reputations of financial institutions all over the world have taken a severe battering in the recent past. “Now banks have to consider how they interact with society. It [banking] can no longer be a closed business activity,” he says.

Driving the Grupo Santander Brasil’s outreach efforts is its Sustainability in Practice: Paths and Challenges programme, a collection of best practice on sustainability coined from Real and Santander’s combined experience.

This means more training. The bank held workshops for around 1,100 business people from across the country in 2008. More than 600 corporate clients and suppliers participated. A sustainability website with online courses, a best practice database and discussion forums accompanied the roll-out.

In addition, it has set up sector groups. The Brokerage Firms Group provides one such example. Formed by workshop participants, the group now works to disseminate Grupo Santander Brasil’s sustainability training in Brazil’s capital markets.

Underpinning the bank’s external engagement is another of Barbosa’s convictions: the need for transparency. In part, this derives from an awareness that social expectations are changing. Coupled with that comes the world of instant communications. No longer do companies have an “on-off switch”, he notes.

Related to both drivers is the rapid globalisation of Brazil’s economy. International shareholders demand global standards, Barbosa points out. For Brazilian firms, that has meant a major shake up in corporate governance and financial transparency practices. Barbosa’s efforts on both counts are paying off. Last year, a share issue by Grupo Santander Brasil attracted $8.05bn in fresh capital – a national record for an initial public offering.

The bank’s sustainability-led strategy is also filtering through at the product level. A heightened sensitivity to changing social and environmental concerns has driven it into a diverse range of new business lines.

“I don’t want sustainability to be a restriction. I want it to be an inspiration,” Barbosa says.

His colleagues have taken him at his word. Today, Grupo Santander Brasil is involved in everything from renewable energy financing and carbon credit trading to tailored banking for disabled customers and microcredit services.

Meanwhile, product areas where Banco Real was already active have been beefed up. Take socially responsible investment. Not only has Grupo Santander Brasil increased the volume of existing funds, but it has launched new funds such as the Real CDB Sustentável and Fundo Floresta Real.

Despite his management trajectory, Barbosa is reluctant to pass on too much advice. Grupo Santander Brasil’s sustainability programme is reflective of the Brazilian context in which the bank operates, he says. Many of its priorities may resonate further afield. But not all.

There is one universal truth he will share, however: the need for an organisation to have a common cause and a common objective. “It’s not easy to find things which will unify people and make them all come and go in the same direction,” he states.

In sustainability, Barbosa has struck on just such a unifying theme. If other banks copy his thinking, it would be one of the few management trends to get his unconditional support.

Sustainability driving innovation: financing tourism

Under the umbrella of its Programa Santander Turismo Sustentável, Grupo Santander Brasil set out to show the need to promote sustainability in the tourism sector.

The bank first piloted the project on the island of Fernando de Noronha, a popular tourist destination in the northeast of the Brazil. Santander holds the only bank branch on the island.

Working with government and community leaders, it mapped the sustainability profile of the island’s tourist industry. Factors under consideration included accessibility, cleaner products, energy efficiency, health, education, entrepreneurship and good governance.

The pilot brought the bank closer to key players such as CVC, the largest package tourist operator in Brazil. The pilot has also led to a technical agreement between the bank and the International Trade Centre, a multilateral agency responsible for promoting trade in emerging economies.

Grupo Santander Brasil: growth of sustainable business volume

Sustainability financing: $442m in 2007; $640m in 2008.
Micro-credit (active clients): 53,400 in 2007 and 82,700 in 2008.

Fabio Barbosa: biography

Fabio Barbosa graduated in business administration from Fundacao Getulio Vargas in 1976, obtaining his masters of business administration degree from IMD Business School, Lausanne, Switzerland in 1979.

He held positions in the treasury department of Nestlé both in Brazil and overseas from 1974 to 1986. In 1986 he joined Citicorp as a director, before becoming president of LTCB Latin America in 1992. In 1995, he moved to ABN Amro, where he became president of the bank’s Brazilian operations in 1996. After ABN Amro acquired Banco Real in 1998, he became chief executive. He retained the position when Banco Real merged with Spain’s Grupo Santander in 2007 to form the Brazilian bank Grupo Santander Brasil.

Fact box: Grupo Santander Brasil

  • Created: October 2007 from merger of Brazil’s Banco Real and Spain’s Banco Santander
  • Now third largest bank in Brazil
  • 3,600 branches
  • 8.5 million account holders
  • 50,000 employees
  • Net income: $3.04bn

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