The Thought Leader's Voice Podcast

Examining Environmental, Social, and Governance Development in Financial Services

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We are thrilled to be in conversation with our very own Associate Director of Thought Leadership Sales, Kevin Anthony, in our podcast series, The Thought Leader’s Voice.

As a seasoned Sales, Communications, Research, PR, and Business Development professional with over 13 years of experience in the industry and a global remit in building and nurturing business relationships, Kevin’s expertise lies in helping global business leaders meet their strategic objectives through insight-led thought leadership initiatives.

Kevin’s client portfolio consists of leading business publishers, financial services, technology, and professional services firms worldwide, with a specific focus on North America and Europe. Kevin has leveraged his industry knowledge and relationship management skills to expand the reputation of iResearch Services across a breadth of industries.

In Kevin’s spare time, he is passionate about mentorship, especially to recent graduates, offering them his expertise and experiences to help them advance in their careers.

In this podcast episode, Kevin will be talking about how sustainability in financial services has evolved in recent years, sharing his industry knowledge and perspectives with our audience.

Key Takeaways

  • Considering geopolitical challenges, the continued fight against Covid-19, and rapidly rising costs and inflation, can the financial services sector sustain the momentum on sustainability?
  • What do companies stand to gain from their ESG efforts? What does sustainability mean for staff retention and recruitment?
  • Which financial services companies stand out as exemplary in their sustainability efforts?
  • How much progress is being made by financial services companies, specifically towards net-zero?
  • Are economic pressures affecting financial services’ commitments to sustainability?
  • 70% of financial services senior leaders believe greenwashing is rampant in the industry. What is the solution to this problem?
  • Do collaboration and innovation hold the solution to sustainability within financial services? What learnings can the industry adapt from other sectors?

Full Transcript of Podcast with Kevin Anthony

Rachael Kinsella: Hello, and welcome to our latest episode of The Thought Leaders Voice podcast, examining environmental, social, and governance development in financial services. I’m your host, Rachael Kinsella, Editor in Chief at iResearch Services. Today we’re delighted to be joined by Kevin Anthony, our Associate Director of Thought Leadership Sales.

Kevin is a seasoned sales communications, research, and business development professional with over 13 years of experience in the industry and a busy global remit in building and nurturing business relationships where he’s actively helped international business leaders to meet their strategic objectives with insight-led thought leadership initiatives. Kevin’s client portfolio consists of leading business publishers, top market research and consultancy firms, finance and tech leaders worldwide, with a specific focus on North America and Europe. In Kevin’s spare time, he’s passionate about mentorship, especially to recent graduates, helping them give a kickstart to their careers and offering his own expertise and experiences to help them advance in their growth. Welcome, Kevin. Thanks for joining us today when I know things are very busy for you.

Kevin Anthony: Thanks Rachael for hosting me and thank you for the lovely introduction. I’ve been looking forward to this podcast.

Rachael Kinsella: Absolutely, so have I. It’s really great to have you here. So if we kick off today, we’re talking about sustainability and financial services and how it’s evolved in recent years. It’s something you and I have been talking about considerably over the past couple of years through our work for clients and our own research at iResearch Services, Kevin. The introduction to our how sustainable is the financial services sector report, says that the global financial services industry is at a crossroads marching towards adopting sustainability but through an expensive and uncomfortable process. This report was written before the Russian invasion of Ukraine, but when we conducted a follow-up survey in September 2022, the situation appeared to be very much the same. Taking into account the ongoing geopolitical challenges, the continued fight against COVID-19, and rapidly rising costs and inflation, what’s the landscape looking like now and for the near future? Can the industry keep the momentum going and build back better?

Kevin Anthony: So basically, in my point of view,  the pandemic and climate change have raised awareness of corporate environmental, social, and governance activities, so-called ESG activities as a shorter term. And Russia’s invasion of Ukraine has brought ESG into the limelight in entirely new ways. Now, the ongoing Russian-Ukrainian war is having a negative influence on financial markets as well as the overall world economy, along with the joint ventures between firms like BP and Shell and their Russian equivalence.

The war has also resulted in announcements by consumer-facing businesses like McDonald’s that they will seize operations there. In addition, several significant international investment firms like JP Morgan and Goldman Sachs have kind of announced their withdrawals from Russia. So I think the current impact on global financial markets’ rising commodity prices, inflation, supply chain disruption, in certain sectors, and fears of global recession due to the current conflict reflects the current uncertainty.

Now, when we look at the most popular development in so-called the financial services industry, the rise in the popularity of ESG parameters has grown significantly over the last few years. Now there are ESG aligned investments have increased, regulators have become more proactive, millennials are driving sustainable investments, and the result of that is that the fund managers are responding. I think we may see a change from traditional strategies, to be honest, to a more honest evaluation of materiality.

Rachael Kinsella: That’s really interesting, isn’t it, to see how it’s developed over the past couple of years, ESG becoming a priority for businesses, particularly in the financial sector, prioritizing sustainable investment and really being driven by younger generations by millennials who are championing new sustainable types of financial investment. And it’s encouraging to see that momentum building despite all the geopolitical challenges, the various events that have happened since we undertook our first piece of research into financial services sustainability.

And still continuing with the fight against COVID, there’s still after-effects there in terms of international markets, but also the multiple geopolitical challenges, inflationary pressures, various economic pressures, and business pressures within organizations themselves having to face multiple regulatory challenges and other changes. So it’s perhaps heartening to see that ESG is still very much at the forefront of the agenda and will continue to dominate the landscape.

Vaughan Lindsay, CEO of Climate Care says that ESG policies that go beyond do no harm are no longer a nice to have, that they’re actually now fundamental to business success. And I think that reflects this shift towards ESG and sustainability initiatives, that it’s actually critical to business success and strategic operations rather than just a nice to have. And that’s something we’ve really seen develop over recent years. 

Our research into sustainability and financial services found that 23% of respondents believe that very few financial services firms currently have the appropriate level of focus on sustainability. 34% believe they’re on their way with initiatives, but are aware they still need to do more. So again, that’s quite an encouraging figure that businesses are aware that there’s still a long way to go. Do you agree? Do you think there’s still a long way to go? Do you think that there are particular initiatives that are demonstrating success?

Kevin Anthony: Well, Rachael, that is a good question, and I do remember the research that we did on this particular topic. Well, Rachael, I believe the majority of financial institutions are aware of the need to give ESG more consideration, both to stand out in the eyes of clients and other stakeholders as well as to respond to regulatory pressure. So I would say by incorporating ESG, most of the financial services firms can take advantage of their existing competencies, system checks, and reporting to meet investor grade standards.

Now, the firms that adopt a proactive approach to integrating ESG and sustainability into their business strategy or philosophy and even reporting have seen clear opportunities, while those that don’t have seen clear threats. They not only become market leaders, but they also would stand to gain from more convenient access to funds and their associated returns. So that’s what my comment would be on this particular question.

Rachael Kinsella: Yeah, I think so. As a tool for competitive advantage and commercial success, as well as actually hitting those ESG targets and becoming a more sustainable organization and indeed funding and financing more sustainable initiatives globally.

Kevin Anthony: Yeah, indeed.

Rachael Kinsella: But what about from an investment perspective?

Kevin Anthony: Well, firms can take strategic action in quite a methodical approach with a strong ESG strategy and begin to gain momentum over time to genuinely differentiate the company. Financial institutions have recognized the need to invest time in ESG implementation to stand out in front of the stakeholders and customers as well as in responding to regulatory pressure. Certain institutions are already investing actively in ESG data and ratings since customers have already begun, I would say, to favor brands that address most of the ESG concerns in a way that resonates their values. Perception is reality and perception of an institution’s ESG efforts will also depend on its reporting.

Rachael Kinsella: Yeah, absolutely. I think the importance of transparency in that regard, better reporting in being able to track that back for shareholders for various different stakeholders and most importantly for customers who are demanding sustainability measures and looking to put their money into firms that can demonstrate their ESG credentials, so that’s incredibly important and again sort of helps in the fight against greenwashing and purporting to be something that you’re not in terms of sustainability.

I think that feeds into another major benefit of having a credible sustainability policy in place. Something that we don’t often see highlighted but is actually business critical is the recruitment and retention of staff. And thinking about staff commitments, 48% of business leaders that we surveyed suggest that their employees would work harder for a sustainable employer. And that’s a very powerful statistic. And again, like consumers and customers, staff or would-be employees are voting with their feet and they’re going towards the companies that can demonstrate that they’re ethical, that they’re sustainable, that they’re working towards a more sustainable future. Is this something that you’ve observed that you found to be true? And what other ways do you think sustainability can help with staff recruitment and retention?

Kevin Anthony: Well, it’s an interesting question. And I mean, since we spoke about stats in our earlier conversation, now I quite a lot read the IBWE, I would say, reports. So what I read from one of the IBM Institute for Business Value Survey, is that 71% of employees and employment seekers say that environmentally sustainable companies are more attractive employers. Now, again, when it comes to statistics in a recent HP workforce survey, 56% of respondents said ignoring sustainability in the workplace is as bad as ignoring diversity and inclusion. And 40% said they would look for new jobs if their current employers did not kind of engage in sustainable business practices; otherwise, 39% even said they would warn others of their company’s poor sustainability practices. Now, I mean, of course, you know these numbers, I’ve just taken notes of it before my podcast here.

So, if you look at the investment trends globally, most of the millennials are investing in sustainable finance. We are living in an era where probably 75% of the global workforce will be represented by millennials by 2025. Now as Simon Mainwaring, the CEO of We First Branding told The Guardian, every employee is looking to feel good about where they work and make a larger contribution. Through sustainability, they can feel better about their role within a company. So yes, you know, sustainability will play a very pivotal role with staff recruitment and retention.

Rachael Kinsella: Yeah, absolutely. I think would-be employees are seeking out the kind of companies that they can feel good about working for, that they believe will make a difference, that are actually doing what they say they will, and are actually taking positive active steps towards greater sustainability. And in the same way that when you’re looking at the diversity, equity, and inclusion equation, where employees are going to be happiest working, where they’re going to be valued, where they’re going to feel that they are making a difference, it all ties in with that attractiveness of an organization. And particularly, in the financial services world, I think demand from potential employees and talent, it’s higher than ever now. And it’s particularly interesting seeing those younger generations coming into more senior roles in financial services companies as well as starting to lead that change themselves.

And it kind of in a similar way, those younger dynamic disruptor firms, the innovative FinTech companies, for example, are really driving sustainability success, and they were highlighted as such in our recent report. Which financial services companies are really standing out as exemplars in sustainability? Why are they so successful? Is it these new challenger firms or are there some of the more traditional organizations that are standing out to you?

Kevin Anthony: So, Rachael, a few that come to my mind now. Now, if you look at Starling Bank, it’s a digital challenger bank based in the UK, it’s branchless, paperless, and run on renewable energy and the pledge to become a net-zero company. Now employees are allowed 16 hours of paid leave per year to do volunteer work. They are a founder member of Tech Zero, a climate action group for UK tech companies committed to fighting the climate crisis. Their target is a one-third reduction in carbon emissions from their own operations and supply chain by 2030. And from 2021, they’re offsetting carbon emissions annually.

Now, their personal and business account cards became the first UK MasterCard debit cards to be made from recycled plastic. Their UK offices run on renewable energy, and they have already completed their first greenhouse gas audit, which helps them to understand where the emissions come from. So, in my opinion, challenger banks like Starling are exemplars in the FS industry. I mean, I hope you would agree with what I’m saying.

Rachael Kinsella: Yeah, I agree. I think Starling is a great example because they’ve stood out for a number of years as doing things differently and doing things in the right way. So, from an ethical perspective as well as a wider sustainability perspective, they certainly garnered quite a reputation for the way they’ve been running their business through different channels, through different processes, but also like bringing in those sustainability factors right the way through their operations, I think that’s an excellent example to highlight. And they come up time and time again in terms of an example or a case study of success and really driving change forward.

And I think those challenger banks, those newer sorts of FinTech-based organizations are the ones that are demonstrating innovation across sustainability as well as the technology that they use and the way they run their business. So, it’s definitely worth keeping an eye on those challenger organizations and the newer disruptive firms to see how they’re approaching things differently and where they’re making headway in terms of sustainability progress.

So globally, more than 5,000 companies have joined the UN-backed Race to Zero campaign, the largest ever global alliance committed to achieving net-zero carbon emissions by 2050 at the latest. How much progress is being made by financial services companies towards net-zero? I’m aware that’s only one piece of the sustainability puzzle, but net-zero is a crucial part of it.

Kevin Anthony: So again, I think, I’d like to refer to one of our survey reports, ‘Sustainability in Financial Services’, in which we found that only 37% of respondents believed that enough was being done, whereas 18% believe not enough was being done to finance sustainable development and practices. And there’s a lot more room to play. 

I think financial institutions have a key role to play in the fight against climate change and credible decarbonization plans. Now, FS firms play an integral role in responding to the global climate crisis. We found in our report that companies are planning to commit in excess of 500,000 pounds towards sustainable initiatives, and 15% of surveyed firms are planning to commit more than 2 million pounds. For example, Anne Richards, the Chief Executive of Fidelity International had mentioned that their mission as an organization is to be net-zero by 2030, which is not an easy thing to say as you are pledging to be ahead of most of the economies and most of their peers. She mentions that the easy thing when you set any goal is to go with a minimum that’s required and 2050 is the challenge to be net-zero.

Now, it’s important that we try and do more than even we are asking the companies we invest in to do. I think Fidelity is trying to, when setting up a challenging goal, is to change the current thinking of their peers, other businesses, and the wider economy perhaps, and to stimulate an action.

Rachael Kinsella: I think that’s really important, isn’t it, to be driven from the top and driven from those leaders within the industry. So, people like Anne from Fidelity sort of taking those ambitious goals and setting the agenda for the whole industry, so that people stand up and take notice. And in a similar way, BlackRock with Larry Fink’s letters addressing the sustainability problem and really highlighting that across the financial services industry and beyond. And it’s those leaders, those front runners who were setting those ambitious targets and also sort of flying the flag for this is what needs to be done; we’re aware it’s ambitious, but unless we try, unless we work together, it’s not going to happen. So I think it does take strong voices and strong positions like that to be able to make change happen.

So, with all of this in mind, we’ve had COP26, we’ve had COP27. So COP26 really opened the industry’s eyes to the extent of the struggle, the needs and the requirements, and the commitments that needed to be in place across the financial services industry towards greater sustainability. And then COP27 was picking up on what progress has been made since various commitments were made across the industry and looking at wider change and wider cross-industry collaborations.

But bearing in mind all of the geopolitical and other economic factors that have come into play since many of those discussions, do you feel that issues such as expanding inflation, the economic damage that we’ve seen are affecting financial services commitments to sustainability and to net-zero? And do you think that’s still very much on the radar as a priority?

Kevin Anthony: So as per the UN, over one in 60 firms with around 70 trillion in assets have joined forces behind a common goal, steer the global economy towards net-zero emissions and deliver the Paris Agreement goals. Now, State Street Global Advisors, trillion asset management and clouds, and many more are also joining the net-zero asset managers initiative today, bringing its membership to about 87 members with assets under management representing over 37 trillion. Now, the Paris Aligned Investment Initiative is joining the race to net-zero. So, the UN convene net-zero Asset Owner Alliance 37 members with over 5.7 trillion assets under management are demonstrating ambition by already setting science-aligned targets for 2025. So, looking at this happening in the FS sector, I think and believe that FS companies are still committed to net-zero.

Rachael Kinsella: Yeah, it does seem to still be that drive towards net-zero and indeed wider sustainability initiatives. It does seem to still be highlighted as the number one priority. It’s interesting to see how organizations are adapting, bearing in mind various other pressures. But unless we have a planet to operate on, there’s not going to be any other types of initiatives. So, if you look at it in those finite terms, it becomes quite a real priority and brings it to life a bit more.

As we discussed earlier, obviously, net-zero is only part of the sustainability and wider ESG agenda. One shocking statistic that we saw from our recent research was that 38% of financial services leaders believe that every financial services company is greenwashing in some shape or form. Now, that figure has dropped from a study that we conducted back in 2021 which was closer to 70%, but obviously, it’s still a significant figure, about 38%.

So, do you agree that greenwashing is still widespread across financial services? What do you think some of the solutions are? And do you think those solutions come in the form of more regulation? Do you think regulation is the answer to stamp out greenwashing or might it be something else? Obviously, we’re seeing more advertising legislation coming in, and we’re seeing more reporting and regulatory reporting initiatives starting to come in globally, but there’s no consistency across jurisdictions at the moment. But with the current regulatory attention in mind, do you think that that’s going to be the ultimate solution, or what else can be done?

Kevin Anthony: It’s interesting. So, I would say, in 2022, Unilever’s cleaning brand Persil is, as everyone knows, and is one of the UK’s most popular had update efforts to appear eco-friendly.  Nevertheless, Persil’s “Dirt is Good” TV ads have been banned by the advertising standards agency for unsubstantiated claims to be kinder on the planet. Similarly, Shell is responsible for around 1-2% of global CO2 emissions from its activities every year, while it continues to plow ahead and invest billions in oil and gas. And yet, despite this, their marketing team thought it appropriate to ask their followers on Twitter what they were going to change to help reduce emissions.

Now, a few months later, some karma was served when a European court ordered Shell to reduce their carbon emissions by 45% by 2030 compared to 2019 levels. It’s the first time that a private company has been ordered to reduce its emissions by a fixed amount with a defined timeframe.

Rachael Kinsella: Yeah, it’s interesting, isn’t it? I think that the advertising legislation and additional regulations that are coming in are definitely having an effect in terms of making unsubstantiated claims around how sustainable an organization or their products or services are. And I think that will continue to go a long way towards greenwashing.

I think potentially there’s other areas that need to be introduced to get rid of greenwashing altogether, particularly when you look across the entire supply chain or you look across where all the different layers of investment are going. So, I think it’s part of the solution. And I think as regulation is coming into play around broader sustainability targets and ESG requirements, that might have a greater role to play in weeding out greenwashing across other areas of an organization as well. So it’s going to be very interesting to keep a close eye on regulatory developments and, and see how they pan out and whether it starts to create a firm barrier against greenwashing.

I mean, looking at barriers to being more sustainable or becoming more sustainable, those companies that don’t have net-zero policies in place cite cost as a major barrier. According to 45% of respondents in our 2021 survey and 51% of respondents in our 2022 survey, they feel that cost is a definitive barrier against putting net-zero policies, in place. So organizations are having to look at their investment and how they’re allocating budgets and making sure that they’re prioritizing ESG on that front.

Other organizations said in our research that they lack the resources to be sustainable. So it’s 38%, so pretty meaty percentage there because they’re still recovering from economic shocks, they’re still waiting for more consistent regulatory measures. For example, 40% of respondents felt that they were waiting for greater regulatory consistency before actually pressing on with their initiatives. And you know, that in itself is no mean feat.

But on the other hand, firms are waiting for this regulatory change to be able to move their sustainability initiatives forward. But on the other, they’re citing regulation as a barrier that the multiple regulatory requirements are the priority and that’s creating a barrier to becoming a more sustainable organization, alongside the costs involved in regulatory compliance and addressing the wider regulatory agenda. So how much of a problem do you think these issues are? What do you think can be done to help?

Kevin Anthony: I would like to quote Anne Richards here again. According to her, the great power that the business and finance sector in particular has is that they understand collaboration. The collaboration that she has seen in particular over the last 18 months, cross-sector, cross-industry, cross-business has been like nothing that she has seen in her 30 years of investment. Another interesting thought is from Gill Lofts, who’s the Head of Sustainable Finance at EY, she says that when they think about transition, they think about value-led transition, not thinking about the financial value. They think about the value of their people, the value you’re giving to your supply chain, to your clients, and the value that you’re giving to society at large. Now, according to me, the way forward has to be of collaboration between governments, businesses, and financial institutions, which is the only way we can achieve the goals that we set as human beings, as a society, and as an economy.

Rachael Kinsella: That’s a really important point, Kevin. I think that the need for collaboration globally across regulators, across governments, across different types of business and organizations and financial institutions in particular, is the only way that we are going to achieve all of these ambitious goals and by working together and working together in new innovative ways that are being brought to light.

I think Anne’s comment was very encouraging to see the level of collaboration across industries across countries was certainly something that over the past two and a half years since we’ve been researching sustainability, ESG and looking at that through the lens of different business sectors, we are starting to see more innovative collaboration more across industry, across jurisdictional collaboration. And we’re starting to see some consistency come in from a regulatory perspective and in terms of legislation. But without continued cooperation, collaboration, without continually, finding new ways to work together for these common goals, no real change is going to happen. So, I think that’s an incredibly important point.

And as our own CEO, Yogesh Shah says, the time is now to build on this momentum and drive activity on all fronts for a better future. Again, it’s no mean feat, but collaborating, working together, addressing this from multiple angles, lenses, perspectives, is the only way that we can really move forward. How do you feel that we can harness the momentum that we are seeing emerge within the financial services sector and their involvement with other sectors? And what learnings can we take from that momentum, from the changes that have been implemented so far into other industries?

Kevin Anthony: So I think we are at the start of a major transformation in capital flows. And COP26 has increased awareness about how the FS industry will be crucial to build momentum amongst businesses, government, and other critical factors. Innovation holds the key to building consensus and momentum, allowing financial firms to play a leadership role in mobilizing decarbonization capital.

If we look at the aviation industry, the task of reducing, and eliminating the carbon footprints of global air transportation is extremely daunting.  Robert Riedel, Partner and Global Leader of McKinsey’s Disruptive Aerospace sector says, getting to net-zero won’t be easy, but it’s possible. In a recent conversation between him and Ron Levin, a Partner at the investment firm, Alumni Ventures, Robert said that there are multiple approaches that the aviation sector can take for getting to net-zero. Now, approaches like upgrading fleets to new models of aircraft that can deliver 15-20% boost in fuel efficiencies, deploying winglets, and using lighter materials on existing aircraft.

Second, there are operational efficiencies, which would include flying more direct routes, cruising at optimal altitude and speed, and decreasing profit delays. Third would be there are disruptive technologies, truly sustainable propulsion alternatives such as hydrogen and electric. And fourth, more sustainable aviation fuels. These are fuels that can be used for our existing storage infrastructure but are made from renewable sources such as biomass. So I think every government, and every business has to set a clear path and goals and think on similar lines. Like Fidelity, 2050 is a challenge to reach net-zero, but we should start thinking about how soon we can reach there and not set 2050 as a benchmark.

Rachael Kinsella: Yeah, absolutely right. And to bring forward those ambitious goals and using that as a call to arms for people to be able to move forward at a faster pace. I think there’s a pattern here of different sectors being able to use innovative technologies, science-led principles, and initiatives to become more sustainable and drive greater sustainability, and also sharing those kinds of innovative technologies and ways of working with other sectors so that they, in turn, can be more sustainable.

And of course, from a financial services perspective, it’s not just looking at the sector itself, but looking at the industries that the financial sector is financing, so, ensuring sustainability throughout all levels of investment and right across the whole supply chain. Again, no mean feat, but with innovative technology developments, new approaches, and collective collaborative efforts, progress can be made. W’re seeing it, we’re seeing it emerging in some sectors over others, but we are starting to see things happen. We’re all aware that it’s still not enough, but hopefully, things can progress and we’ll improve as we all work together. So let’s hope that’s enough, not just for the financial services sector, but across all sectors.

Thanks so much for joining us today, Kevin. I really enjoyed talking to you and hearing your insights from the research that you’ve been doing across a number of types of business and areas looking at financial services and sustainability.  Hopefully, speak to you again soon.

Kevin Anthony: Thank you Rachael for hosting me. Speak to you soon.

Rachael Kinsella: Thanks, Kevin. Bye now.

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