Inspire finance leaders to further integrate Environmental, Social and Governance (ESG) considerations into their decision-making

My personal leadership challenge over the next two years is to continue to inspire finance leaders to further integrate ESG considerations into their decision-making.

A number of finance leaders have started to integrate sustainable investment decisions into their investment strategies or business models. However, more can to be done and numerous barriers to long-term sustainable investment decision-making need to come down. The financial community and companies’ finance departments are still very much characterised by short-termism and self-interest. They are only very slowly shifting their focus on providing short-term profits to shareholders to a more encompassing stakeholder model aimed at the creation of long-term and “shared value” for the wider society as defined by Porter and Kramer (2011). Some argue that private effort is insufficient. ClearBridge Investments (2017) noted the scepticism from many investors about the benefits of a sustainability approach and their misunderstanding of ESG performance drivers. Other obstacles include: a misalignment between the interest of owners of capital and investment professionals, investment products failing to meet the needs of responsible investors, the lack of consistency and comparability of ESG data as well as skills needed for ESG analysis, the lack of harmonised policies, and also clarity on fiduciary duty and the omissions of ESG factors by advisory firms when making recommendations (PRI, 2017).

I imagine that sounds like a huge challenge to a lot of people and it certainly does sound like this to me. Having said that, I feel that I have something to bring to the table when it comes to helping with this challenge.

I do not pretend to inspire the entire financial community all on my own to change its attitude to investing and integrate ESG considerations more into their decisions. However, I believe that through my current role as Advisor – Capital Markets for HRH The Prince of Wales’ Accounting for Sustainability project (A4S), I can add value to this agenda.

My personal leadership style is generally recognised as democratic. Democratic leaders use participation and collaboration to build consensus. They value creativity and encourage group members to share ideas and opinions resulting in them feeling more engaged. They usually inspire trust and respect from their followers. These leadership traits should help me when trying to build engagement from the financial community.

More particularly, I am currently focusing on the launch of A4S’ Asset Owners Network whose aim is to inspire this community to integrate ESG considerations into their investment decisions. This new network will provide an opportunity for the Chairs of pension funds and sovereign funds to share sustainable knowledge and best practice.
Another project on which I am currently working is the A4S Finance Leaders Forum, a high-profile event which will be hosted by His Royal Highness The Prince of Wales at Saint James’s Palace in July 2018. The aim of this event will also be to inspire sustainable investment decision-making but this time across the whole of the financial community from asset owners, to investment management companies via stock exchanges as well as financial regulators, large corporates, investment banks and rating agencies.
My participation in these projects is more at a strategic and engagement level drawing from my 20 year-experience in business development as well as people and strategic management within the capital markets. As such I believe my role adds value to this agenda. Nevertheless, I cannot help to regularly feel that I could do so much more or that what I have achieved so far is only a drop in the ocean of what needs to be completed. Then, I try to remember that the task is gigantesque and that only through the sum of individual efforts like mine and strong collaboration between all stakeholders involved that substantial change will be achieved.

I have another project in the pipeline which is to research how the methodologies used by providers of second-opinions and ESG ratings are perceived by investment managers and how they could be improved. The word in the industry is that there is a plethora of these and they are not consistent, transparent and comparable enough. I hope that this research would contribute to the improvement of these methodologies and that my work could be useful for the definition of a commonly used methodology by investment management companies.

Finally, I am planning to explore how I could contribute further to this challenge by taking on a senior management role within a large organisation to help build strategic partnerships with various stakeholders (e.g. governments, investors, local communities, non-governmental organizations (NGOs), and other companies) in order to bring sustainable change to the industry.

 

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2 thoughts on “Inspire finance leaders to further integrate Environmental, Social and Governance (ESG) considerations into their decision-making

  1. Very interesting three personal challenges. As discussed in our 1:1 coaching session last month in London, all three challenges are very relevant to your skills set, resources at your disposal and to your current network. Regarding your first challenges, indeed it contributes towards a gigantesque task. A4s launch event in July seems right platform to collaborate and reinforce ESG agenda within Asset Owner’s Network. You experience would allow you to bring pragmatic approach and put forward ESG argument that could resonate with existing challenges faced by the Asset Management Industry. Your second personal challenge regarding research methodology could be extremely useful in the industry where there is lot of ‘green washing’ going on. I would look forward to hear further on this challenge as you make progress. I think you would be able to capitalise on the learnings from CISL for this opportunity. With your previous experience in rating agency along with CISL studies and your current role, I believe you are best placed to executive your third challenge. Some of the pointers discussed in our 1:1 session for each of the opportunity should assist you in this journey.

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  2. You are right: investors now realise that sustainable development can actually provide profits to shareholders. For example, in France, last year, we saw an increase of 15% in sales of organic food. Furthermore, in june, there will be a conference in London on how investors can be involved in the plastic industry https://www.unpri.org/events/plastic-matters-exploring-the-role-of-investors-to-create-a-plastics-economy-that-works/2881.article

    Indeed, such an enormous task requires common efforts and therefore a lot of communication to get people onboard.

    On a similar subject, I also recently met a girl who is creating a start-up where she will connect NGOs to big groups. She realised that employees want to find interest in their daily job and companies want to retain talents. She therefore wants to bring NGOs needs (for example in marketing, management of projects etc) to those big groups to facilitate pro bono work. This is a kind of indirect investment.

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