- Financial Services
Find out how sustainability benefits businesses, why climate change policy and finance is now mainstream, pick up practical tips about measuring ESG, and hear what our latest survey says.
Sustainability – our survey says…
Sustainability not only helps create a better world – it also strengthens companies and their bottom line.
That’s one of the main conclusions from a new, exclusive survey by iResearch Services into Sustainability in Financial Services.
But there’s much more fascinating data to unpack from the survey of 550 senior decision-makers in financial services across Europe, Australasia, China, Japan, the USA, UK, Russia, and India.
The survey was conducted to find out whether firms think sustainability is a fad or whether they are committed for the long term. The iResearch survey shows how far businesses have progressed with net-zero policies and considers the main barriers to further success. More importantly, our survey reveals how much companies are willing to spend on environmental initiatives.
The sustainability survey also examines how prevalent ‘greenwashing’ is – misleading marketing claims that products are environmentally friendly when they are not.
And it reveals what investors and consumers most want from sustainability.
Kevin Anthony, Associate Director of Sales and Thought Leadership at iResearch Services, says, “There is a clear lack of trust within financial services that businesses are talking the talk, as well as walking the walk, when it comes to adopting a more environmentally-friendly business model. This can only be achieved through a shift in mindset within the boardroom to make this a reality.”
Our research findings are reinforced by comments from Greenpeace’s UK exec director, a partner at top law firm Browne Jacobson, and Susannah Streeter from Hargraves Lansdown. Susannah, a senior investment and markets analyst, echoes some of the themes in May’s Spotlight on Sustainability about how climate change is now mainstream.
Susannah Streeter says: “Companies are under increasing pressure to play a more active and visible role in helping combat climate change. It is no longer acceptable to simply do no more harm, there is now an expectation for businesses to rapidly implement policies which will lead to a sharp reduction in carbon emissions, given the scale of the mountain to climb.”
Want to find out more? We’ve recently explored more on these themes, our survey’s results and its consequences in a series of articles:
HSBC doubles down on climate change with two major financing initiatives
HSBC is not only providing more options for clients who want to invest in climate change solutions – it is putting its own money into sustainable ventures. The global banking giant has unveiled two climate change financing initiatives. Firstly, it has teamed up with World Resources Institute (WRI) and WWF in a US$100 million initiative to help build a net-zero global economy. The Climate Solutions Partnership aims to unlock barriers to finance for companies and projects that tackle climate change.
It will focus on start-up firms developing carbon-cutting technologies and sustainable projects that would otherwise find it difficult to obtain financing. The venture forms part of HSBC’s climate strategy to become a net-zero bank by 2050 or sooner, in line with the Paris Agreement goals. It has also pledged to work across the financial sector and beyond to accelerate solutions that will help avoid catastrophic climate change.
Secondly, HSBC Asset Management is bringing together a dedicated team to focus on direct investment in emerging climate technology solutions. Its new Climate Technology Team (Climatech) will explore opportunities for venture capital clients to invest in global technology startups specializing in climate change solutions, particularly in the agriculture, energy, transportation and insurance sectors.
It is hoped the venture, led by Head of Venture and Growth Investments, Remi Bourrette will provide “major sources of financial and environmental value over the decade.” HSBC Asset Management currently manages US$45 billion in alternatives strategies.
Yogesh Shah, CEO, iResearch Services says, “HSBC has chosen to work with these two influential non-profit groups to help fund initiatives aimed at reducing climate change. It’s a positive move and will hopefully encourage other high street banks to step up and take responsibility. The formation of the Climatech team will provide further opportunities for alternative investments, so helping to fund exciting young technology businesses and creating new ideas to cut carbon levels. If they play it right, it will be a win-win.”
- How easy is it to make your business or organization carbon-neutral? Read about the experience of the Institute of Chartered Accountants.
- What does sustainability mean for accountants? The first Sustainability Conference for Chartered Accountants Ireland takes place via Zoom on 16th June
- Here is a roadmap for the energy sector to achieve net-zero
- Unsure where you are on carbon neutrality? Take edie’s 10-minute net-zero carbon business survey
Asia leading growth in eco-wakening
More people are holding themselves, their communities and businesses to higher standards over respect for the planet and news coverage of nature-based protests more than doubled in 2019. WWF has commissioned its own in-depth report, An Eco-wakening, measuring global awareness, engagement and action for nature. The 50-page document, from the Economist Intelligence Unit, shows that people all around the world care that nature is under threat, with 1 million out of 8 million species at risk of extinction. The biggest growth in engagement and awareness is in Asia, led by India (190%), Pakistan (88%) and Indonesia (53%). Consumers are buying more sustainable goods, and corporations are responding, most notably in the cosmetics, pharmaceutical, fashion and food sectors.
“The call for bold, decisive action by governments and businesses on behalf of the planet and future generations is getting louder and louder,” says the report.
Marcelo Behar, Vice President Sustainability & Group Affairs, Natura & Co, comments, “The adoption of sustainable practices in business is not just about improving sustainability credentials, it makes business sense. Whilst there may be a cost to mitigating against these risks, this cost is far less than the cost of not acting.”
- Find out how Singapore plans to become the green finance capital in Asia with help from its central bank
The turning point in climate finance?
The financial press believes that climate investing and green finance is now a mainstream issue and now there is no turning back, says the GreenBiz website. And City A.M. explores a similar theme in relation to the UK.
Another major step has been the issuing of an Executive Order by US President Joe Biden on Climate-Related Financial Risk. This has wide-ranging transparency, disclosure and investment implications for investors, companies and regulators, reports ESG Today.
The Executive Order states: “We know that the climate crisis, whether through rising seas or extreme weather, already presents increasing risks to infrastructure, investments, and businesses. Yet, these risks are often hidden. With so much at stake, this Executive Order ensures that the right rules are in place to properly analyze and mitigate these risks. That includes disclosing these risks to the public and empowering the American people to make informed financial decisions.”
Three big wins for climate change activists in the oil sector
The growing influence of climate change activists and shareholder concerns over carbon emissions in the energy industry is illustrated by three major changes that came the same day. On Wednesday, 25th May, climate activities claimed three major victories over major oil companies:
1. Independent Directors elected to ExxonMobil board
Activist hedge fund Engine No. 1 has succeeded in getting two independent Directors elected to the ExxonMobil board. The diversified investment firm proposed four new directors. Former Andeavor CEO Greg Goff and former Neste EVP for Renewable products Kaisa Hietala were elected by shareholders who want the company to adopt more clean energy policies. The vote over candidate Alexander Karsner was too close to call at the time of writing, while Anders Runevad was not elected. The months-long battle was one of the most expensive proxy fights ever.
In a statement after the vote, Darren Woods, Exxon Chairman and Chief Executive Officer, says, “We welcome all of our new directors and look forward to working with them constructively and collectively on behalf of all shareholders. We’ve been actively engaging with shareholders and received positive feedback and support, particularly for our announcements relating to low-carbon solutions and progress in efforts to reduce costs and improve earnings. We heard from shareholders today about their desire to further these efforts, and we are well-positioned to respond.”
2. Chevron shareholders vote to cut emissions
Investors in the US oil giant Chevon voted for the company to cut carbon emissions. In total, 61% of shareholders backed a proposal from activist Follow This. Its founder, Mark van Baal, says the shareholder revolts marked a “paradigm shift” and a “victory in the fight against climate change”.
3. Court orders Royal Dutch Shell to reduce carbon levels
Royal Dutch Shell was ordered by a court in the Netherlands to reduce its carbon emissions by 45% by 2030, compared with 2019 levels. Shell’s target was a 20% reduction and it plans to appeal. The lawsuit was filed in April 2019 by seven activist groups, including Friends of the Earth and Greenpeace, on behalf of 17,200 Dutch citizens claiming Shell’s business model posed a threat to the Paris Agreement goals. Roger Cox, a lawyer for environmental activists in the case, says the ruling is “a turning point in history” and could have major consequences for other big polluters. Sara Shaw, Friends of the Earth’s international program coordinator for climate justice and energy, said the organization hoped the verdict would “trigger a wave of climate litigation against big polluters to force them to stop extracting and burning fossil fuels.”
Rachael Kinsella, Editor at iResearch Services, says, “It’s not just one isolated industry commentator who believes climate change policy is at a turning point – the sentiment has been echoed by many. This month has seen so many big victories by activists and major policy announcements hitting the news headlines that I would not argue with them, either. Sustainability issues will only continue to be thrust into the spotlight as other activists and investors make their views known about environmental and social issues and as organizations take the necessary steps to play their part in meaningful change.”
Need practical help with ESG?
As Environmental, Social and Governance (ESG) issues become increasingly prominent, banks must commit to action, according to a new ESG and Banking report from Strategy&, part of the PwC network. The report outlines how the banking sector can consider and introduces practical initiatives that address ESG ambitions, identify growth opportunities and meet stakeholder needs, while creating value.
- Read this iResearch blog about Sustainable practices that will keep businesses ahead of the game
- Other important ESG stories you may have missed this month
- Funds and investment
The importance of ESG investment by millennials
Three-quarters of older US millennials believe climate change poses a serious threat to society, a new survey suggests. At the same time, millennials exclusively or often use investments that take ESG factors into account, compared with 19% of Gen Z, 16% of Gen X and 2% of baby boomers, according to the poll of 1,000 U.S. adults ages 33-40 conducted on behalf of US business news channel, CNBC.
Gurpreet Purewal, VP of Sales – Thought Leadership, at iResearch Services, says: “As US millennials are expected to inherit around $30 trillion over the next few decades, the fact that they think differently about ESG investments is likely to be hugely influential on markets over the next few years.”
- A new framework has been issued to promote investor action of the climate crisis and net-zero future, reports the Ceres non-profit. The guidance is from The Investor Agenda collaborative
- To see how fast the planet is changing, take a look at these examples from The Conversation website
- Has the market woken up at last to climate change finance? Is carbon no longer a dirty word for markets? Tell us your views
- More detailed data from listed companies in India show six out of 10 ESG domestic funds were launched in 2020-21
- Pension funds could provide a major boost to sustainable investments, if they deliver expected returns, a US conference has heard
Regulation, reporting, accountability
How do you measure ESG?
While many ESG scores and investment insights are available, they may not measure the same thing. “The layperson may legitimately expect that an ESG score provides an overview or rating on how ethical a company or its products are, says a blog from Refinitiv. Rather than reflecting a relative performance based on fundamental ESG attributes, which are publicly disclosed and auditable, many asset managers and pension funds formulate their own sustainability goals and criteria.
Andrew Newby, Operations Director, iResearch Services, says, “In a bid to accurately measure ESG, many tools are now available to businesses. But how accurate are they and which ones do businesses most favour? How ‘independent’ are they and what else should investors and consumers be looking at to ensure companies are moving in the right direction towards sustainability?”
iResearch will be sharing the results of investigating this subject soon in a new study. Watch this space!
- If you want to find out more about ESG disclosure, read the helpful Guide to ESG Reporting Frameworks from intelligent, accessible sustainability software platform, rio.
People, Community and Connection
Breaking through the glass ceiling
The world’s biggest bank JP Morgan has appointed two women to head its biggest division. Marianne Lake, a former chief financial officer and current CFO Jennifer Piepszak will become co-CEOs of the Consumer Finance Division. Last year, Citigroup appointed Jane Fraser as CEO, the first woman to run a major Wall Street bank. Meanwhile, a record number of female fund managers have been nominated for FE fundinfo Alpha awards, with more than 60 shortlisted.
- Insight leader Dr. Parves Khan discusses how empowering mentoring can be for women in this iResearch podcast
The largest minority group
Did you know that more than 1.3 billion people live with some form of disability, representing at least 17% of the global population and forming the largest minority group worldwide? Even so, disability is often overlooked by business, says the World Economic Forum (WEF). Although 90% of companies claim to prioritize diversity, only 4% consider disability in those initiatives, according to data from the Return on Disability Group. Global Accessibility Day, every third Thursday in May, highlights issues including how people with disabilities face barriers to access the jobs market, the consumer market and the digital world. For instance, a recent analysis of the world’s top one million websites found that 97% had an accessibility issue. WEF suggests three ways business leaders can move forward with disability inclusion to future-proof their business and expand opportunity for all.
WEF says, “Doubling down on disability inclusion in business could be one of the greatest opportunities for growth in this new decade of disruption.”
Reap huge rewards from inclusivity
If you are in any doubt about the benefits of racial inclusivity in the workplace, a new report describes the economic opportunities as being huge. Asset management firms can use personal development, mentoring and education to fully utilize Black, Asian and Minority Ethnic professionals, the reboot video argues.
- Is change happening fast enough in the banking sector?
- Does your business take disability inclusion seriously? Tell us your thoughts
Hanging on to hybrid working…
During the pandemic, many employees have got used to flexible working and virtual meetings. And it seems they want to keep it that way. One-third of more than 2,000 UK workers surveyed say they would leave their job if they were denied hybrid working, reports City A.M. David Collington, an associate at Barnett Waddingham says businesses need to embrace changes in working patterns. “The risks of not adopting flexibility for the retention of staff are starting to rise to the surface as we begin to move out of lockdown for good. All this is just as well, as an earlier PwC Remote Work survey estimates fewer than one in five executives want to return to pre-pandemic office conditions.
…and how the planet benefits
By shifting to virtual meetings, not only do staff benefit by not having to spend time commuting to work, but the planet gains, too. Remote software provider, LogMeIn, estimates that its 2 million customers saved 63 million metric tons of greenhouse gas emissions between April 2020 and March 2021 by using its GoToMeeting and GoToWebinar services rather than travelling to company meetings.
If something in our May Spotlight on Sustainability has interested you, let us know.
We are always looking for new contributors to our podcasts and blogs on sustainability and all its many implications for businesses. Get in touch to collaborate!
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