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Despite $1B Fraud Lawsuit, Bank of America Insists, We Acted Responsibly

October 29, 2012

It’s safe to say that when most people think of corporate social responsibility (CSR), they think of environmentally friendly packaging, supply chain issues, or even corporate philanthropy. But finance?

According to Alexandra (Alex) Liftman, Global Environmental Executive forBank of America, finance has an important role to play in advancing CSR and sustainability goals. I sat down with Alex at the Business for Social Responsibility conference in New York City last week to get her perspective on Bank of America’s approach to CSR and sustainability. The conversation comes at an interesting time for the country’s second-biggest lender by assets. Federal prosecutors filed a $1 billion lawsuit last Wednesday, accusing Bank of America of carrying out a scheme started by its Countrywide Financial unit that defrauded government-backed agencies by making loans without proper controls.

How does the news of the government’s lawsuit against Bank of America affect the company’s reputation for socially responsibility?

Well, in any situation, you have to look at the facts. Around these legacy mortgage issues, we have stepped up as an institution and acted responsibly and as quickly as possible to address a broad range of issues. In this particular instance, the claim that we failed to repurchase loans from Fannie [Mae], is just false. At some point, Bank of America can’t continue to be expected to compensate entities for the losses that were the result of the financial crisis. That’s the position we have taken on this particular instance.

I would also say that whether it’s the principle reduction programs that we have or the loan modification programs that we have, you would come to the conclusion in looking at the numbers, that we have worked really hard to address these issues and that is a big part of our being a socially responsible company.

What is the role of finance in sustainability?

Finance plays a role in a myriad of ways. Yes, there are a lot of operational issues that we have to look at and we certainly look at our supply chain, just like Coke or any other institution looks at its supply chain.

The areas where we as a financial institution in particular, have such great opportunity is in transformational finance and our rigorous risk management. There are two sides of the coin.  On the risk management side, we are thoughtful and careful about the way we work with our portfolio companies and in particular those companies that are, for instance, natural resource intensive on the environmental side or human resource intensive on the social side.  We ensure that companies have very good governance in place, and we have specific public policies that are on our website regarding how we do business with a whole host of companies in areas (such as industries or regions) that we have identified as high risk.

So that’s on one side of the coin, working with those companies that have the greatest immediate opportunity to address climate change in the environmental space or to address other social issues.

On the other side of the coin, I talked on the panel [at the BSR conference] about the ways we are working with bank clients, from municipalities to large corporate clients, to finance low-carbon activities.  In that vein, we have a big effort underway to work with our investor clients. WithMerrill Lynch, we have a trillion dollars of assets that we advise clients on every day. So we work with those clients to help them make smarter decisions about their investment portfolio with environmental, social, and governance issues in mind.

As I started to say, we can do this within our own client portfolio but we have an even greater opportunity with the clients who have assets with us for which we don’t necessarily have a fiduciary responsibly, but we actually advise them on how to invest. That’s the next big opportunity for us.

Do you have any specific examples of transformational deals?

We have done two deals in the last year. The first is the largest distributed solar deal ever. We worked with our client Prologis, which has large industrial warehouse spaces across the country. We helped put the financing in place so it can put distributed solar on hundreds of those rooftops in potentially 26 states across the country. It’s a complex deal that has a lot of legs to it in terms of phases of when it rolls out, but it is a massive and transformational deal.

The other deal is one we did with Solar City. This is a residential deal built on the same premise – the ability to aggregate smaller projects that are happening across the country that have similar dynamics to them. One large financing [deal], instead of incremental steps, allows the company to really jump steps in terms of getting solar into play and bringing it to scale.

In your talk at BSR, I was really struck by your public policy stance on climate change. Can you describe how Bank of America is involved in this policy debate?

If you go back and look at the 2007 press release about our $20 billion commitment, and then look at our most recent press release on our $50 billion goal, as well as any public communication we’ve had in between, we talk about climate change publicly and we talk about it as an issue.

We have said that the facts are there, the science is there and that this is, frankly, an issue that we have a responsibility to address. That has been our position [and] … we support a market mechanism for a price on carbon. We have been behind cap and trade and we’re supportive of looking at other market mechanisms. When we talk to public officials, that is our stance. We do that through our participation through a variety of different groups, and we do that in our own conversations.

We have also been spending a lot of time with cities, regions and local municipalities who are ahead of the federal government, and certainly on any international agreements, on this issue. One place where we spend a lot of time is California, which is just rolling out its own cap and trade system. We work with them to advance what they are trying to do on a local level as well. I would say that it’s multi-faceted, but it really starts with the most important thing: a strong and vocal public understanding and stance on climate change here in the United States.

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