Jack Payne | 18 May 2021
Year on year, environmental, social and governance (ESG) factors have increasingly driven organisations' change agenda, but in no sector is this trend more prevalent than financial services. With the compliance coming thick and fast, an increasingly demanding client base and a push for firms to create better outcomes for their customers (and in turn the planet), ESG is the talking point for many senior leaders in the sector.
Simply put, ESG has now become good strategy, good business and good economics.
We recently ran a webinar with longstanding client Grant Thornton, exploring industry perspectives on ESG. I was thrilled to sit on the panel alongside a number of industry experts from across the sector to discuss how businesses can be effective in their ESG journey.
Here are my top three discussion points from the webinar…
What is your industry perspective on ESG?
My focus is on helping financial services organisations scale change. If I look at what ‘the market is buying’, the rising prominence of ESG and how that’s driving decision making across my buy-side clients is unrecognisable compared to two-to-three years ago.
This has only been magnified by the pandemic where some businesses have been accused of taking advantage of schemes such as furlough whilst not sharing the burden with their staff. Remember the uproar towards football clubs and hugely profitable corporates that still furloughed their staff?
This shift towards ESG is reshaping the landscape, and we’re now identifying ways to measure what was previously immeasurable. Take a look at CCLA’s new mental health benchmark which views how listed companies approach and manage employee wellbeing; an increasingly telling measure of corporate sustainability and an indicator of the rise of the ‘S’ in ESG where previously ‘E’ took centre stage.
ESG is no longer a standalone concept, but now a mainstream corporate strategy, where ESG and strategy are inextricably linked. As mentioned before, ESG has now become good strategy, good business and good economics.
What is your advice to clients looking to ensure success in their ESG journey?
Organisations need to understand that this is a journey with a lengthy time horizon – there isn’t an endpoint like a traditional change programme. With that in mind, authenticity is in my view, the critical factor to ensuring a successful ESG journey and as an industry, we need to see this as more than just an opportunity for firms to stay ‘relevant'.
Quilter’s Q1 whitepaper earlier this year highlighted that ‘firms must espouse the values of ESG with which they look to invest in’. This is where we see ESG become a truly transformative concept.
Over the past few years, I’ve witnessed a momentum shift where firms have realised an ESG transformation programme requires a truly joined-up cross-functional response in order to espouse the values of ESG and in turn show authenticity.
Using a recent example of an insurance client I worked with, they were very early on in their ESG journey and had members of their leadership team delivering ESG off the side of their desk. Our brief was to help them build out a dedicated in-house ESG function to join the dots. In other words, to create a joined-up cross-functional programme. This included:
- Reviewing the company’s purpose and values
- Developing the company’s corporate strategy
- Establishing ESG advisory groups and internal steering committees.
- Implemented metrics and KPI’s to ensure continuous improvement in ESG performance
- Ensuring the workforce was equipped with the required skills for ESG
- Implementing changes and programmes in culture, hiring, staff education and internal communications
- Set new ESG commitments including partnering with three new charities.
As you can see, this programme brought all corners of the business together to deliver a genuine response where ESG was embedded into the DNA of the organisation. Only once this cross functional approach was established, could the business begin conversations on communicating their ESG narrative internally and externally.
If your response is to run a PR campaign to celebrate a new sustainable fund or product you’ve launched, but you’re not espousing the values of ESG, authenticity, relationship with the regulators and your reputation will likely be lost. And, in my view, that’s the art of delivering a quality response to ESG.
What advice would you give to new firms?
New firms are in a fantastic position to deliver ESG authenticity as they’re typically starting with a blank slate.
The first port of call should be a deep assessment across functions. I recently worked with a wealth management firm on this agenda and the first step we took on this journey was to find someone who could assess their maturity. Increasingly businesses are benchmarking firms on ESG using deep and qualitative methods. Starting with this to sense check current thinking is an important step that shouldn’t be overlooked.
Once you’ve been introspective, you can re-visit and, if needed, redefine your mission statement and what you want to achieve. That vision will need to transcend all areas and people within the organisation and that’s when you can think about ESG as a more traditional transformation programme that affects operating models, people, process, data etc.
The crux is you need knowledgeable people who can bring all parts of the business together to build your joined up, cross-functional programme. Do you have someone who can be that conduit in-house? If not, speaking to someone externally who can be objective, constructively challenge and guide the business through the initial phases of the transformation is extremely valuable.
The full webinar can be viewed here.
Jack Payne is a consultant at Interim Partner at NSCG's Financial and Professional Services practice. As market leaders in asset and wealth management change, we help accelerate performance through leadership & talent solutions. To learn more, please get in touch.