Connect to Deliver: Making Sustainability Work in Financial Services

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Connect to Deliver: Making Sustainability Work in Financial Services

Key Takeaways from the First Dutch FSI Sustainability Round Table

The first FSI Sustainability Round Table gathered leaders from across the financial services sector to work together towards creating a sustainable future. The key takeaways? Link ESG goals to your core strategy, start with your biggest challenges, solve them and share your story. Deloitte facilitators Vanessa Otto-Mentz and Hesse McKechnie reflect on the lessons learned and the inspiration that got us here.

For most of us it is very clear: we need to develop profitable sustainable and resilient business models, and to deliver on the Paris Agreement and SDG ambitions. To do this, we need to look around and learn from others in the sector. This is why we brought leaders from banking, insurance and asset management together for our first FSI Sustainability Round Table in January – digitally 2021-style. The 56 FSI leaders listened, shared thoughts, raised doubts and confronted the challenges of integrating sustainability into financial services.

A dangerous game of Jenga

One thing was universally clear: sustainability can no longer be looked at as just another topical risk or business opportunity. We need to act now. Dr. Deon Nel, chief conservation officer of the WWF, likened our current practices to a dangerous game of Jenga, where we’re rejigging a structure’s individual pieces and hoping the entire thing doesn’t come crashing down. What we do affects biodiversity, which is structural to the integrity of the entire system. Without biodiversity, our livelihoods and very lives are at risk.

Prince Carlos de Bourbon de Parme, director of Compazz, argued that the financial services industry can play a crucial role in speeding up what is currently a sluggish transition. To do that, he said, organisations must challenge the current system. Compliance and governance tools from the pre-transition era no longer suffice. It’s time to go back to the drawing board and reinvent the rules of the system and their risk models, which will lead to new business and finance models. He also urged leaders across Dutch society to move faster and get into action as the window to avert catastrophic climate risk is closing.

Sense of urgency

Eric Usher, head of UNEP-FI, said that understanding current risks to our business and knowing what’s at stake will fuel a sense of urgency within our organisations. Else Bos echoed this sentiment and made a powerful case for treating sustainability risks as a financial risk. We couldn’t agree more. DNB has calculated that Dutch financial institutions worldwide have EUR 510 billion in exposure to companies with high or very high dependency on one or more ecosystem services.

A future-proof sustainability strategy will rely heavily on reliable data and comparative and integrated reporting, all the more so because shareholders, society and regulators are looking at it closely. Currently the data isn’t always there, but this does not mean financial institutions can afford to wait. DNB’s executive director Else Bos praised the frontrunners, those organisations that are making a solid risk management effort despite not having all the data or clear templates.

Reporting on sustainability

Given that sustainability risks are real risks supervisors expect organisations to manage them properly. Laura van Geest, AFM chair of the Executive Board, noted that up until now, companies have been better in reporting on their plans than on the actual implementation of these plans. She also said current reporting is more focused on the good and things close to home as compared to the bad, the ugly and things further away. This clearly signal to us the need for financial organisations to take practical steps, to consider their scope-3 impacts and business risks, as well as move to mainstream material sustainability issues into their core business decisions and actions.

We too recognise this behaviour in our business as even the frontrunners find it hard to follow through on their plans and report credibly on their sustainability risks and efforts. But that shouldn’t stop you from trying, van Geest said, and she pledged the AFM will support those organisations trying to report properly on how they integrate sustainability into their day-to-day operations. “We do not expect an ‘A’ or a Dutch ‘10’ the first time you’re reporting on ESG issues,” she said. “We know the EU taxonomy implementation is hard, but we do expect you to try.”

Meaningful conversations

Part of the Round Table included peer to peer sharing and a few financial services leaders stepped forward to share their lessons learned. Tjeerd Krumpelman, head of advisory, reporting and engagement at ABN AMRO, shared how the bank’s award-winning impact reporting looks at long-term value creation for all of its stakeholders, not just shareholders and regulators. This has led to rich and meaningful conversations, “those that will help you stop focusing too much on the analyses of balance sheets and start valuing intellectual, social, natural and human capital.”

Other speakers stressed the importance of storytelling: organisations should be able to connect their sustainability story to their strategy. They must be able to explain why it makes sense for their organisation to focus on sustainability now. And that story should be shared both internally and externally to elicit ultimate commitment.

Avoiding a ‘tick-the-box’ mentality

While all attendees felt a sense of urgency, there continue to be doubts about truly taking on the challenge. Avoiding a ‘tick-the-box’ mentality was one of them, as was discussed in a series of break-outs. Many emphasised that sustainability should be approached from the positive side, since it also brings about new business opportunities: for instance, the current biodiversity investment gap is around 700 billion US dollars. Moreover, impact investing is growing faster than the market, as Jacco Minnaar, chair of the Triodos Management Board, pointed out.

For us, the best part was being able to facilitate the individual connections between each of the participants. Creating a safe space to engage amongst peers is what makes this a success. We aim for the next round table to take place in September. Hopefully our recovery from COVID will allow us to meet physically, which will enable even more connections. Will you join us?

Are you a leader in the financial services industry who wants to participate in our FSI sustainability network? Please contact Vanessa Otto-Mentz or Hesse McKechnie. Please let us know which topics you want us to address in our next round table.

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