Turning ESG ambitions into actions in Financial Services

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  • Issue
  • 15 Minute Read
  • 23 May 2022

From tackling inequality to transitioning to net zero, PwC’s latest 25th CEO Survey shows the extent to which environmental, social and governance (ESG) is now central to the financial services (FS) industry’s strategic purpose. How can your business deliver?

“This is not a fad,” says Amanda Blanc, CEO of Aviva, discussing the growing momentum around business commitments on issues such as sustainability and diversity. “Top of our agenda is looking at how we are running the business, not just for today but for three years, five years, 10 years, 20 years’ time and beyond. Her sentiments are echoed by many other FS industry leaders, with nearly half those we surveyed confirming they have committed to net zero or are working towards it. 

More broadly, FS organisations are starting to make stronger connections between purpose and profitability, and recognising the value of building ESG into commercial strategy. In part, this stems from the growing threats posed by climate change and inequality. It also reflects the importance of ESG in attracting and retaining talent, customers and investors, at a time when people are looking for companies with values that align with their own.

The big question is: how to turn ESG commitments into actions. The opportunities for FS organisations to make a difference are clear. Infrastructure investment is a case in point. With government finances constrained in the wake of the COVID-19 pandemic, FS can step in to help channel the £40 billion of annual investment needed to fund low carbon and digital infrastructure over the next ten years. FS has an equally important role to play in helping to fund the training, infrastructure and business support needed to create jobs and boost opportunities within Britain’s deprived communities.

“But the world has changed and the social aspect, the focus on health and wellbeing and diversity and inclusion, have all become absolutely central to the way you run a business.”

Michael Ryan, CEO of Dalmore Capital

No easy answers

But as the CEO Survey findings further underline, there is work still to do. For FS organisations, ESG impinges on the fundamentals of business, from where to invest, to how to measure success. It can’t just be tacked on to existing strategy. ESG also affects how to manage performance, the make-up and diversity of leadership, and how to engage with governments, regulators and society as a whole. The challenges are heightened by an influx of new regulation and a lack of consistency in the criteria used by both regulators and rating agencies to judge ESG performance.

Building momentum

So how can you drive change within your organisation and live up to promises on ESG? 

1. Embrace radical change
The FS organisations out in front recognise ESG is a commercial imperative and growth opportunity, rather than just a compliance or reputational exercise. As a result, they’re putting ESG at the centre of their purpose, strategy and how the business is run. For example, rather than leaving the social and environmental impacts of investments to a specialist ESG team or compliance vetting process, they are integral part of the skills sets, performance incentives and decision making processes throughout the organisation.

2. Ensure products and services are socially inclusive
Rightly, FS organisations are looking at how to boost diversity and inclusion within recruitment, progression and ways of working. But inclusion is also an important commercial consideration and opportunity to reach out to new customers. For example, women benefit from only a fraction of venture capital investment in the UK. How can your business level up access to credit and investment? How can this support your social mobility objectives? Similarly, women face much lower income in retirement than men. How can your business develop the solutions needed to close the gender pension and protection gaps?

3. Don’t just follow the herd
As in any time of transition and change, there will be difficult decisions. For example, you may come under pressure to withdraw support from businesses seen as environmentally damaging. By planning for the long-term, you can help businesses to make the necessary changes. Even ‘dirty’ producers can be turned into clean and sustainable enterprises with the right investment and ingenuity. If you explain what you’re doing and why, you could make the difference and take stakeholders with you. 

4. Transparency is key to driving trust
Trust will be hard-earned as you seek to overcome widespread public cynicism over so-called corporate greenwashing. That’s why it’s so important to go beyond narrow regulatory and financial reporting by clearly setting out your strategy, its rationale and progress against it.

Once in a generation opportunity

FS organisations can help to forge a fair, just and sustainable future. Delivering on this purpose demands fundamental transformation, rather than a tactical response. While such radical change is challenging, it offers a once in a generation opportunity to drive innovation, win new customers and be at the forefront of sustainable economic growth.

Contact us

Elizabeth Stone

Elizabeth Stone

Asset and Wealth Management Leader, PwC United Kingdom

Tel: +44 (0)7725 070068

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