Sustainability

RESPONSIBLE AND PROFITABLE BUSINESS PRACTICES

At Arion Bank we want to set an example as a company which employs sound and responsible business practices. In all the decisions we make, we assess the various interests at stake and the long-term view is just as important as short-term considerations. We assess the possible gains and risks involved in the decisions and loans we make, with many different interests at stake.

One of our strategic objectives has been to list companies on the stock market and we have been involved the majority of IPOs on recent years. 

Every year we collaborate on a wide range of exciting investment projects with our customers with the aim of strengthening the business sector in this country. The Underwriting and Investment Committee makes decisions on investments and the sale of assets. We have focused on gradually divesting the companies we own but which are in unrelated areas of business. One of our strategic objectives has been to list companies on the stock market and we have been involved in the majority of IPOs on recent years. This has been an integral part of the process of regenerating the Icelandic stock market and increasing the number of investment opportunities on the general market. 

We have a project team for responsible investment and lending at Arion Bank. In 2017 the team did an excellent job of devising a formal policy on responsible investments and implementing it into the Bank's investment and lending processes. This work will continue in 2018.  

The organization IcelandSIF was founded in 2017 with the aim of increasing investors' knowledge of the methods of sustainable and responsible investment and Arion Bank was a founding member. In late 2017 Arion Bank became a signatory to the United Nations Principles on Responsible Investment (UN PRI).

Internal rules and controls

Arion Bank employees are well aware that the Bank’s activities have an impact on different groups and on society as a whole. 

Arion Bank employees are well aware that the Bank’s activities have an impact on different groups and on society as a whole. We have established procedures, a code of ethics and policies on different aspects of operations, including disclosure, information security, money laundering and equal opportunities.

The Bank’s code of ethics is designed to foster responsible decision-making at Arion Bank. It applies equally to the Board of Directors, management and other employees, and it is the responsibility of the CEO to ensure that the code of ethics is enforced. The code of ethics is approved by the Board of Directors and should be reviewed at least annually.  

Responsible corporate governance is important to us. Having in place clear decision-making procedures is the key to responsible corporate governance and we follow set procedures throughout the Bank to ensure that everything is handled professionally. Arion Bank was recognized as a model company in corporate governance in December 2015 following a formal assessment of the management and Board of Directors. Further information on Arion Bank's corporate governance can be found here.

Risk management is a critical component of our business. It is our aim to ensure that risk management remains everyone’s business. Risk management is discussed in more detail here.

Combatting financial crime benefits society

Arion Bank takes its responsibilities to protect its customers and the assets under the Bank’s care seriously.  

Financial crime can cause severe damage to society and undermine trust and the effectiveness of the financial system. Arion Bank takes its responsibilities to protect its customers and the assets under the Bank’s care seriously by fighting financial crime.

We seek to prevent financial crime and the damaging impact it can have on our customers, our business and society. In order to be able do this the Bank provides its employees with the appropriate training and education, maintains effective monitoring and collaborates closely with the law enforcement authorities. The Bank is also aware of the risk of conflicts of interest which inevitably occur in our business and we have taken special measures to prevent conflicts of interest from negatively affecting our customers' interests.

We prioritize measures to prevent:

• Money laundering, terrorist financing and violations of trade sanctions
• Conflicts of interest
• Market manipulation and insider misconduct
• Fraud and corruption

One of the most important measures to prevent financial crime is to know well the people we are working with or doing business with. The Bank checks the background of people working on its behalf and obtains information on its customers, both from the customers themselves and from official sources, such as Registers Iceland and Register of Companies.

Automatic monitoring is one of the measures employed by the Bank to prevent financial crimes. The Bank has various computer systems in place to identify suspicious transactions or customers who may fall into a risk category in terms of corruption, money laundering or terrorist financing. The Bank is also vigilant towards cyber-attacks, an increasing threat as digital banking gains popularity.

Once a year our employees take tests to ensure that their knowledge of anti-money laundering measures and the handling of confidential information is adequate. 

However, no form of monitoring is as effective as an alert employee. Employees undergo regular training where, among other things, they learn to recognize suspicious behaviour. Once a year our employees take tests to ensure that their knowledge of anti-money laundering measures and the handling of confidential information is adequate. In addition numerous courses are held at the Bank, covering topics such as the Bank's competition policy, conflicts of interest and market misconduct.

Employees are urged to report any suspicions they may have of financial crime, whether on the part of a fellow employee, business partners or clients. Employees can send anonymous tip-offs and the Bank keeps the source of its tip-offs confidential unless otherwise dictated by law. All reports of potentially illegal conduct are investigated by the Bank's internal control units and referred to the relevant law enforcement authorities as required.

CONVENIENT BANKING

Providing first-class services to our customers is at the heart of what we do.

Providing first-class services to our customers is at the heart of what we do. This means developing good relationships with our customers, responsible lending, offering top quality financial advice and encouraging people to save money. We want to enable our customers to do their banking when and wherever it suits them. One of our key tasks therefore has been to develop and launch new digital services.

We listen to the voice of our customers because their satisfaction and experience is important to us. We regularly perform surveys where we ask how likely it is that our customers would recommend our services to others. In 2017 we measured individual service factors more frequently so that we can make improvements to the underlying services. For example, we measured how satisfied customers were who had contacted our call centre, visited a branch or taken out a mortgage.

We keep a record of all suggestions from customers and try to act upon them.

Good relationships are the key to understanding our customers’ needs. Arion Bank is a relationship bank which aims to develop long-term relationships with customers by offering expertise, outstanding and diverse services. We appreciate all suggestions and recommendations we receive. In order to keep track of how we can do a better job, we document all these suggestions and try to act upon them. We also keep a record of all ideas and praise we receive and direct them into the appropriate channels. In 2017 we recorded around 18,169 suggestions, ideas and praise from customers.

We look at these suggestions as an opportunity to improve and to do better today than we did yesterday. Many of these suggestions have resulted in improvements to the way we do things. In some cases they have been the source of major technological changes which have had a wide-reaching positive impact on our business and the services we provide to customers.

Digital services

Our goal is to be the leading digital bank in Iceland. We are making our digital products services more accessible than ever, providing our customers with more convenient banking services any place and any time.

We utilize the data from our research to make good decisions and develop smart solutions.

We are simplifying and automating processes, making things more straightforward for the customers and our employees. We utilize the data from our research to make good decisions and we aim to develop smart and creative solutions which our customers find useful.

Taking full advantage of technology allows us to accommodate our customers whenever and wherever it suits them. Technology enables us to know our customers, and to understand and meet their needs. We are there for our customers, whether they want to do their banking at home or through digital channels or whether they want to come and meet us in person. 

We brought our digital services to the next level during the year with the launch of numerous new digital service channels, adding to our range from 2016. In addition the Arion app was named best banking app in Iceland in a survey by MMR. The year 2018 has already seen the release of additional digital products and we will continue to expand our range so that we can make banking even more convenient for our customers. 

Financial literacy

Our customers’ understanding of financial matter is important to us. It's part of our service and one of our responsibilities to society. We ensure our customers have easy access to information on their own finances through products such as the Arion app and the online bank. We also offer advice on personal household finance to improve people’s understanding of their own finances, and we organize a range of finance courses.

The rapid development of financial services and the multitude of available options can make finance a complex and difficult topic but financial literacy improves our customer's understanding of their own finances and the options available to them. Financial literacy covers a range of topics, from personal finances, making budgets and setting targets, to bigger decisions such as buying a house or choosing a pension scheme.

Major financial decisions can have a huge impact on people’s future financial security but by improving financial literacy people can make informed decisions. Better financial literacy enables customers to get to grips with their personal finances and lays the foundation for financial stability.

We make every effort to offer our customers quality financial advice. In 2017 seven employees qualified as financial advisers, bringing the total to 57 at the Bank.

As in previous years we also held a diverse range of courses and information meetings on various aspects of finance and we thereby helped our customers and the wider community better understand the wide range of choices available and to take informed decisions on their own finances.

It is important to start early and we have placed special emphasis on promoting financial literacy among the younger generation. We have held a number of well-attended financial courses for children and teenagers across Iceland. In recent years Arion Bank has been the main sponsor of the Institute for Financial Literacy whose aim is to improve financial literacy in Iceland.

We actively participate in the debate on financial and economic issues in Iceland and promote open discussion by organizing a range of meetings and conferences on various financial topics.

Some of the events we have been involved in:

• Jón Jónsson gave a talk on money to more than 100 teenagers aged 14-16 years.
• Breki Karlsson, director of the Institute for Financial Literacy, held a series of talks on financial literacy which were open to the general public.
• Numerous customers and other guests attended meetings on pension savings organized by the Bank.
• Arion Research held more than 10 meetings which were attended by more than 1,000 people. Some of the meetings were streamed live on the Bank's Facebook page.
• Arion Research appeared in numerous interviews in the media and provided input to various meetings and conferences.
• The Icelandic Financial Services Association (SFF) has been running a project called Fjármálavit (Money Matters) whose aim is to improve financial literacy among teenagers and Arion Bank is participating in the project.
• More than 8,000 people attended seminars, conferences and other events organized by the Bank in 2017. Arion Bank also participated in numerous conferences and exhibitions elsewhere.

Lean management 

Since 2012 Arion Bank has adopted lean management, the aim of which is to eliminate waste and improve efficiency. All of the Bank's employees have now received training and instruction in lean management. The basic principle is to put the customer at the centre of what we do and minimize whatever does not increase the value of the service. Continuous improvements play a key role in the process, i.e. we are continuously seeking to enhance our services and do better today than we did yesterday. In 2017 we completed 6,069 improvements, which is well above the target of seven improvements per employee.

An attractive place to work

Our employees form a dedicated and united team. We endeavour to look after all our people and strive hard towards creating a stimulating and positive work environment in which we can all grow and develop our skills.

The Bank's policy is to guarantee equal opportunities and conditions for all employees, irrespective of their gender and to be an attractive place of work for everyone.

We have a clear equal opportunities policy. The Bank's policy is to guarantee equal opportunities and conditions for all employees, irrespective of their gender and to be an attractive place of work for everyone. The Bank has an equality committee and we have formulated an equality action plan. The Bank has signed the CEO Statement of Support for the Women’s Empowerment Principles (UN Women) and the UN Global Compact, which is an international benchmark for companies whose aim is to empower women in companies and increase their influence in society. With its focus on equal opportunities Arion Bank is striving to meet the fifth sustainable development goal, gender equality.

In 2015 Arion Bank became the first Icelandic bank to be awarded equal pay certification by the union VR. The certification is formal confirmation that the Bank has established an equal pay policy and that formal, documented procedures are in place which meet the requirements made by the regulators that decisions on salaries are based on objective and professional factors and are not discriminatory. From the outset, we have met the requirements in all reviews and pay analyses and the explained pay gap has been steadily decreasing since 2015. We will apply for permission from the Centre for Gender Equality to use the equality symbol to confirm that the Bank meets the legal requirements for equal pay certification which came into effect on 1 January 2018.

There is zero tolerance towards bullying, sexual harassment or any other inappropriate behaviour, and we have established a clear policy and regulations on how to deal with conduct of this nature.

We regularly conducts workplace audits and different internal surveys and analyses with the aim of improving the working environment and enhancing job satisfaction. A healthy balance between work and private life is important and employees are also encouraged to look after their health. There is zero tolerance towards bullying, sexual harassment or any other inappropriate behaviour, and we have established a clear policy and regulations on how to deal with conduct of this nature.

It is important that our employees are able to add to and maintain their expertise. Therefore we offer a range of courses every year designed to help employees improve and maintain their professional and personal skills. In additional to formal courses and seminars, many employees attend a regular series of lunchtime lectures titled Building relationships. These lectures are open to all employees and the aim is to keep employees abreast of what's going on at the Bank and inform them of the different projects being undertaken.

Human Resources at Arion Bank are discussed in more detail here.

Creative economy

One of our main focuses at Arion Bank in terms of sustainability is to help stimulate a creative economy. In recent years we have collaborated on a wide range of exciting investment projects with our customers with the aim of strengthening the business sector in this country. We have tried to ensure that companies under our ownership but operating in non-banking sectors are sold in stages to a diverse group of owners and listed on the stock market. Arion Bank has been involved in more than 60% of IPOs in the past few years, thereby contributing to the regeneration of the Icelandic stock market and adding to the number of investment options on the general market.

Arion Bank works with and for entrepreneurs and seed companies. 

We firmly believe that cultivating innovation has a positive impact on society and we are therefore dedicated to supporting innovators, which includes providing them with access to advice and funding and helping companies in product development. Arion Bank works with and for entrepreneurs and seed companies, as well as investors. Art and design are also major contributors to creating an economy characterized by creativity and innovation and Arion Bank provides strong backing to such activities. Arion Bank’s firm backing of innovation and creative economy, active participation in development and investment projects and responsible banking supports two of the UN’s sustainable development goals, namely the eighth goal, which addresses decent work and economic growth, and the ninth goal which concerns industry, innovation and infrastructure.

Innovation

Innovation can transform ideas and knowledge into new technology, new ways of doing things or even new industries in both established companies or at the seed investment stage. All endeavours to innovate, develop and create new value are important and we take such enterprise seriously and carefully consider whether and how we can provide our support.  

We want to create fertile ground and a positive and stimulating atmosphere for innovation and seed companies in Iceland and we offer diverse ways and financial solutions to help individuals and companies achieve their future goals. Arion Bank supports innovation from primary schools to universities and all the way to the workplace.

Popular business accelerators

Arion Bank’s main seed investment programme is Startup Reykjavík. Its objective is to create an environment where entrepreneurs can receive advice and guidance from experienced mentors in order to realize their ideas and thereby create new business opportunities. Participating teams are offered seed funding in the form of equity, training and working facilities where entrepreneurs have the opportunity to meet and exchange ideas. The teams are also given the opportunity to present their business ideas to Icelandic and international investors with a view to discussing how to develop the ideas and raise future funding. Startup Reykjavík is wholly owned by Arion Bank but the business accelerator is run in collaboration with Icelandic Startups. Startup Reykjavík was named the best business accelerator in the Nordic region in 2015 and the best one in Iceland in 2015, 2016 and 2017 by the Nordic Startup Awards.

Startup Energy Reykjavík (SER) is a business accelerator based on the same template as Startup Reykjavík but it focuses on projects and companies in the energy sector. It was launched in the spring of 2014 and seven companies took part. A further seven companies participated in the spring of 2015, followed by seven more in the autumn of 2016. SER is a collaborative project between Arion Bank, Landsvirkjun, GEORG, Innovation Center Iceland, Icelandic Startups and Iceland Geothermal.

Total number of investments by Arion Bank in seed companies

The number of applicants to the two business accelerators clearly illustrate the great need for seed funding and active mentoring for seed companies. Arion Bank invests in all the companies selected to participate in the two business accelerators.

The number of applications to Startup Application and Startup Energy Reykjavík 

Funding a company as it takes its first steps is generally of critical importance. Companies which have gone through SR and SER have received additional funding following their participation in the business accelerators. At the beginning of 2018 companies had received ISK 3,600 million in funding in the form of equity and grants.

 
Funding of SR & SER companies by year in ISK millions

Collaboration with European Investment Fund on loans to SMEs 

In 2016 Arion Bank began collaborating with the European Investment Fund (EIF), and now offers funding for small and medium-sized enterprises who are planning to bring innovation into their business, whether in the form of new products, procedures or services. The aim of this partnership is to provide companies with access to funding at lower interest rates once certain conditions have been met and the thereby to support innovations, stimulate business activity, research and development. The loans are intended for SMEs planning to invest in:

• New production
• Introducing new products, procedures or services
• Development
• New methods
• Technology

The EIF guarantees the part of the loan provided by Arion Bank and the customers benefit from the partnership by paying lower interest rates.

The EIF is owned by the European Investment Bank and partners 74 financial institutions in 29 European countries. Arion Bank is the only bank in Iceland which is collaborating with the EIF.

One of the largest shareholders in venture capital fund Eyrir Sprotar 

Arion Bank, in cooperation with Eyrir Invest, runs the venture capital fund Eyrir Sprotar slhf. Eyrir Invest and Arion Bank are the fund's largest shareholders and in 2016 the Bank upped its investment to ISK 1.3 billion.

Never too early to start

Arion Bank is one of the main sponsors of the NKG innovation competition which is intended for students in the 5th-7th grade. A total of 1100 ideas were entered in 2017 and 25 were selected to compete for the top prize.

The Bank is also one of the main sponsors of Junior Achievement Iceland. The role of these organizations is to prepare young people for the future and to improve their skills for the job market and by promoting education in innovation, entrepreneurship and business at secondary school level. Innovation is presented to students with the aim of fostering the spirit of entrepreneurship and training the innovators of the future. In 2017 more than 300 students from eleven schools took part and this number is set to grow over the next few years. The aim is to give Icelandic students the opportunity to experience innovation first hand in the classroom. Arion Bank is one of four sponsors behind the project.

Supporting innovation at many levels of society

It is our view that by supporting innovation at various levels of education and different stages of a company's development we are fostering an environment in which an even more varied business sector can prosper in the future.

By doing this Arion Bank is supporting innovation all the way from primary school to the workplace.

Art and design

Arion Bank organizes art exhibitions and lectures on the visual arts at its headquarters on a regular basis. The Bank owns around 1,300 pieces of art by many of Iceland's leading artists and many of these works are on display at Arion Bank's branches and places of work.

The Bank owns around 1,300 pieces of art by many of Iceland’s leading artists.

January 2017 saw the opening of the exhibition Því myndin byrjar einhversstaðar. Paintings from the Bank’s collection were paired with works by a younger generation of artists, works which corresponded to each other in one way or another. At the opening, Dorothée Kirch gave a fascinating lecture on this relationship between the pieces.

In March the Bank's headquarters were again one of the venues for DesignMarch. In 2016 Arion Bank and the Iceland Design Centre signed a 3-year partnership agreement on the Bank’s involvement in this design festival. The DesignMatch event was hosted at our headquarters as part of DesignMarch. It has been described as a kind of trade fair where Icelandic designers are given the opportunity to meet international buyers and manufacturers and to present their ideas and designs. At the same time the exhibition Hús í myndlist opened at the Bank’s headquarters, displaying works by different artists who have engaged in one way or another with architecture. The works, by many of Iceland’s most renowned artists, spanned from 1890 to the present day.

In September a major exhibition of the works of Sigurður Guðmundsson was opened. It contained a wide selection of pieces from the 50-year career of this popular and important artist. Gunnar J. Árnason gave a well-attended lecture at the opening on Sigurður's career and the exhibition drew a large number of visitors in the three months it was open. 

Several works were added to the Bank’s collection during the year. These include two photographic works by Sigurður Guðmundsson, a sculpture by Katrín Sigurðardóttir, a photographic work by Guðjón Ketilsson and a painting by Jóhanna Kristbjörg Sigurðardóttir.

In 2017 the Bank also donated some works from its collection to good homes. This includes a large painting of fisherman by Sveinn Björnsson which was presented to the retirement home Hrafnista in Hafnarfjörður. In the summer of 2016, the retirement home Dyngja in Egilsstaðir was given two works by the artist Steinþór Eiríksson.

Respecting the environment

Arion Bank seeks to minimize the negative environmental impact of its activities. This is how we show our respect for the environment. Our objective is for environmental awareness to be reflected in our operations, management, decision-making and the day-to-day work of our employees. to  of its activities

We have initiated numerous projects designed to reduce our environmental impact.

Environmental issues are one of our main priorities. We seek to create a comprehensive overview of the environmental impact of our activities and to minimize the negative aspects. We have initiated numerous projects designed to reduce our environmental impact. These include buying electric vehicles for work-related journeys by employees and courses on eco-driving, using environmentally friendly packaging and cups, introducing a transport policy for employees, support for forestry and campaigns to improve waste sorting and reduce printing. Our strong focus on digital services is critical in reducing our ecological footprint. By reducing the negative impact of operations on the environment and by targeting lower greenhouse gas emissions, Arion Bank is supporting the thirteenth goal, which is climate action.

Our environmental objectives

• Optimize the sorting of waste produced by the Bank
• Use energy sparingly
• Use environmentally friendly solutions when printing by using new technology
• Encourage employees to adopt environmentally friendly practices at work and at home
• Choose environmentally friendly products and/or services wherever possible
• Increase the number of paperless transactions
• Reduce waste

Action plans and environmental objectives

Human-induced climate change is one of the main challenges facing humanity. Arion Bank signed the City of Reykjavík and Festa’s Declaration on Climate Change in November 2015 and since then we have been methodically mapping the Bank's ecological footprint and further reducing our negative impact on the environment. An important step was taken when we implemented environmental software from the innovation company.

We are working in close accordance with our action plans to achieve set objectives.

Since 2016 our annual reports have included special environmental reports. The reports set out our environmental objectives and action plans to reduce our environmental impact. We are working in close accordance with our action plans to achieve set objectives and we have met with success in this respect.

Our projects on environmental issues are a journey we are going to take in the coming years. We aim to gain a more complete overview of these issues by continuously mapping all the factors which may have a negative impact on the environment.

Arion Bank's 2017 environmental report contains further information on our main tasks, achievements and objectives on environmental issues.

Supporting the community

Arion Bank supports numerous organizations, companies and projects in the community. We sponsor the Iceland Design Centre, the Icelandic Handball Association, the Icelandic Sports Association for the Disabled, NKG Innovation Competition and we are a member of the ÍSÍ Olympic family. In addition the branches support diverse causes in their home towns.

Arion Bank is a sponsor of the Iceland Design Centre. This partnership includes Arion Bank’s support for DesignMarch, one of the Iceland Design Centre’s main venues for promoting Icelandic design.

Arion Bank is a sponsor of the Iceland Design Centre under a 3-year agreement signed in 2016. This partnership includes Arion Bank’s support for DesignMarch, one of the Iceland Design Centre’s main venues for promoting Icelandic design and ingenuity.

The conference What Works was held for the second time in Reykjavík in April 2017. The conference discussed the Social Progress Index and how certain countries have achieved standout social progress results. Arion Bank is one of the main sponsors of the conference according to 3-year agreement reached with Cognitio at the end of 2016.

During the year Arion Bank signed a partnership agreement with the National Olympic and Sports Association of Iceland (ÍSÍ). This makes the Bank a member of the ÍSÍ Olympic family and it provides strong support to the association with the goal of promoting sport in Iceland and participation in international events by Icelandic competitors. Arion Bank also renewed its sponsorship agreement with the Icelandic Handball Association, continuing a relationship spanning many years. A new Arion Bank handball advert was released in collaboration with rapper and handball player Jói Pé who wrote the song used in the advert.

The Bank is a supporter of the National Olympic and Sports Association of Iceland (ÍSÍ) and has thereby become a member of the ÍSÍ Olympic family. 

Arion Bank and the employees’ association Skjöldur organized the second Arion Community Day on a beautiful spring day in May. A team of employees and their families spent the day tidying up and doing a variety of jobs around several community residences.

The campaign Plastic free September was held for the first time in 2017. Arion Bank supported the campaign and encouraged employees and customers to reduce their use of single-use plastic as much as they could. This campaign tied in well with the Bank’s environment policy which also aims to reduce the use of plastic. More information on projects related to this policy can be found in Arion Bank’s environmental report.

We also provide support to a number of charities including the Icelandic Cancer Society, the Icelandic Red Cross and Children’s Ward at the National Hospital, and our branches support diverse sport and cultural activities in their home towns.

Partners

These are some of our partners in 2017.