The Long & Winding Road: Reflections on the Integration of Sustainability in the Financial Sector

Executive Summary

• Without C-suite sponsorship it's difficult/impossible to generate Sustainability/ESG momentum

• People's perception of what long-term is (especially within customers of Financial Services), is dramatically shorter than you might think

• Wider regulation is needed to drive behavioural change - that change won't happen without it

• Don't wait for regulation to land before considering how it's going to impact your business - get ahead of it

• If you're serious about building sustainability into your business you have to make it a key part of your 'People' strategy

Luke - Amber, thank you for joining us. Could we start with a brief introduction to yourself, your professional background, and how that pertains sustainability.

Amber - I started my career in B2B publishing before moving into the Wealth Management space. My first exposure to Sustainability was around 6 years ago when our then CEO and the chairman announced that we were going to launch a newsletter and website dedicated to ESG. ESG was a subject matter that not many of us knew about, but there was a growing demand for content.  So there was a lot of internal training given in order for us to understand our new offering  that was designed to educate  the Wealth Management sector on the evolving trends around ESG and Sustainability.

I was then poached to join an Asset Management firm as their Head of Marketing. By this point Sustainability had become a key topic for the Financial Services industry. There was a lot of momentum around it to the point where companies weren’t able to keep up and there were a lot of people running around like headless chickens trying to do Sustainability ‘stuff’!

The company I joined created a Sustainability Committee composed of key individuals across the business; Heads of Asset Class, Risk,, Legal, Compliance, Marketing and Sales. Our role was to look at how Sustainability was going to impact our day to day business operations, both in the terms of the products we sold and how we operated as a business.

Luke - Did you volunteer to be involved in the committee or did it land on your plate (you were volunteered!).

Amber - Probably a 50:50 split, Most things get dumped on Marketing(!) but Sustainability requires a completely different way of thinking. For lots of organisations, it's turning their operational activity on its head and I found that really interesting.

Luke - What’s changed since then in terms of how companies ‘do’ Sustainability?

Amber - People are now much more knowledgeable about Sustainability and what it means to their business. There are more resources, more support available both internally and externally. People know what it is that they're supposed to do and so there's the ability to be more proactive about it. And then you have a very different overall governance structure. Sustainability isn’t the last thing on the agenda any more, it's moved up the priority level so it's easier to build momentum and make progress.

Luke - What or who ultimately drove the Sustainability agenda at your company?

Amber - We had a new CEO who was passionate about Sustainability and that obviously raised its importance on the internal agenda. Her focus was on diversity but she encouraged her senior leadership team to have their own Sustainability agenda within their functions. She also empowered our Sustainability Officer to go off and drive change, which was something that had been very challenging ahead of the new CEO arriving -  it was a one person band until then. 

I think the investment space is probably similar to most industries in that if you have people who’ve been doing things - successfully - in a certain way for 35 years and then you tell them they need to do things differently they are very resistant to those changes. 

From the Sustainability side, this makes it even more important that senior level decision makers are prepared to change their way of thinking. They have the power to influence, educate and persuade people within an organisation that they need to / have to change.

Luke - How long did it take for your Sustainability Officer to feel like people were paying attention and listening?

Amber - About 3 years, but momentum really changed in the last 2 years with the new CEO coming in. Before then it was a lot of banging on doors for not much engagement!

Luke - What's the correct level of expectation we should have for how much the Financial Services sector cares about Sustainability? The amounts of money in the industry and the influence that money brings, are both huge so having the sector ‘lean into’ Sustainability is a big deal.

Amber - Additional regulation is coming and that will have a big impact. The CEO of UKSIF, James Alexander has been championing more regulation, so all financial services firms will be more heavily scrutinised and that will change behaviour whether people like it or not. But companies shouldn't be waiting for that; they should be looking to get ahead of that by changing the people part of their organisation, whether that’s changing people's job specs or hiring profiles, incentivising people in different risk frameworks and more education within the organisation. The Financial Services industry already has a lot of rules and procedures that they have to follow so this isn't about reinventing the wheel; it would just be an additional lane to be woven in.

Luke - To that last point, I recently had a discussion with the Chief People Officer of a US software firm and she said that if you don't make it clear to people, when you are employing them, that Sustainability or Impact or ESG, is a core part of the values of your company, don't be surprised if when you start saying these are really important values, a lot of people say “Wow, that's news to me!” Based on your experience, what’s the biggest challenge to the Sustainability agenda?

Amber -  A couple of years ago we did some research looking into what people thought of as ‘long-term’ in the context of the financial products we were selling. The research was national, different financial backgrounds, different demographics etc.  The results showed that for the average person “long-term” is five years. So that's the challenge for Financial Services  where you're trying to sell the idea of people saving for the future.  What we determined was that people can't, don’t or won’t visualise their future, so if you think about that in the context of sustainability, it’s deeply worrying. 

Luke -That’s scary. 2030 is 7 years away, 2050 is 27 years away. So what that research suggests is that sustainability in terms of climate change isn’t going to be anywhere near front of mind for a lot of people.

Amber -  Exactly - their minds and behaviour aren’t there.  There’s an awful lot of work and effort collectively needed, as a population to get the sustainability ball really rolling, if we are to stand any chance in hitting the UK’s and other countries’ climate change targets of being Net Zero by 2050.  Fact.