Uncovering the State of Sustainability in Financial Services

How Sustainable is Financial Services?

According to a global study of 550 finance professionals conducted by iResearch Services, nearly 50% believe sustainability will drive new customers. This realization has translated into around 67% of firms investing more than half a million pounds into sustainability initiatives each year.

Commenting on the findings, Yogesh Shah, CEO, iResearch Services said, “It is clear that sustainability initiatives are demanded by customers, partners and prospects. Moving forward, it won’t be enough to simply show good intentions, but to demonstrate tangible outcomes as well.”

Data, Reporting, Information and Misinformation

According to Josh Gregory, CEO and Founder of green investing app, Sugi, the demand for greater transparency and clarity in sustainable investing has shot up in the past year. However, this can only be carried forward through 2021 and beyond if the industry evolves to provide the transparency clients require.

The iResearch Services survey of 550 finance professionals revealed that:

• 38% feel every company is involved in greenwashing
• 57% believe governments need to do a better job of supporting the implementation of sustainability initiatives
• 30% said they were waiting for regulation to come into place before taking action

On this issue, Hitanshu Dhingra, AVP Investment Research at iResearch Services, says, “Sustainable investing has come a long way from ESG based ratings to impact assessments. Though lack of information and impact measurement tools pose a challenge to investors, I believe the sustainability movement is here to stay and industry participants will come up with solutions for the impact measurement and reporting issues.”

Old Versus New

“Many investors see strong ESG practices to be proxies for good management. For example, ethical concerns can reflect a manager’s attitude to long-term risk – particularly their ability to view social and environmental risks as financial risks.” according to Julia Dreblow, Founder, SRI Services and Fund EcoMarket.

With younger companies having undiscovered solutions to the industry’s current challenges, FinTech is pushing forward sustainability and more than half of finance professionals citing that they already have/are in the process of having a net zero agreement indicates that sustainability is here to stay.

According to the research:

• 36% feel that corporate clients need to pull their weight in shouldering responsibility for sustainability in the industry

Progress – But Is It Enough?

Advancements in sustainability are visible through the UNFCCC Race to Zero, the Net Zero Asset Managers initiative and the G7 finance ministers’ announcement to make corporate climate change reporting compulsory. Our recent survey revealed that firms in China (40%) were leading the way with an investment of more than £2 million.

Our research found that:

• 56% of Chinese companies believe their business to be very sustainable
• 40% of Chinese companies feel they are somewhat sustainable but know what and where they need to improve

Only 12% in the US are investing over £2 million on sustainable initiatives and this drops further to only 8% in the UK.

The main concern remains whether long-term net zero commitments are inadvertently a contributor to greenwashing today? This is a fear voiced by Vaughan Lindsay, CEO of ClimateCare. He says,”The time to act is now. A robust and transparent climate strategy is no longer optional in the investment sector. It’s an essential element of a successful investment strategy to attract new capital, manage climate-related risks, and harness the opportunities of an economy transitioning to a low carbon state.”

Addressing the Bottlenecks

As the uptake of sustainable practices increases, many roadblocks remain. Affordability, understanding the exact impact of individual and company-wide sustainable practices, and recruiting and retaining talent are just a few of them. Our survey found that:

• 48% of finance professionals suggest that their employees would work harder for a sustainable employer

The Covid-19 pandemic may have provided an impetus to companies to re-evaluate how they operate and review the consequences of their activities.

Short-term Steps Towards Long-term Change

As our survey has shown, the global financial services industry has made huge progress towards sustainability.

• 48% believe that their business is ‘very sustainable’ right now and have a strategy in place to go even further
• Only 5% believe their organisation is not sustainable enough

Yogesh Shah, CEO at iResearch Services says: “Employees and employers are in sync on the issue of sustainability, both sides perceive the need for sustainable initiatives as paramount to the future of their business. What is perhaps surprising is that only a small portion of financial services professionals feel the bottom line will be impacted.”

However, the financial services industry risks losing that progress and future momentum unless it addresses the challenges that are now emerging.

To know more about the state of sustainability in financial services and the commitments and action that can be taken to drive it further, read our ‘Sustainability in Financial Services’ report today.