A recent analysis from Deloitte “Many financial services companies mobilize for ESG reporting” offers answers to questions I hear frequently from companies about structuring the internal ESG function, preparations for ESG disclosures and data quality concerns. Here are a couple takeaways on organizational structure and governance specifically relating to financial services:
“Financial services is the only one among five industries analyzed in our survey (the others being consumer products; life sciences and health care; oil and gas; and technology, media and telecommunications) in which the CFO is more likely than the chief sustainability officer to have management responsibility for ESG disclosure. This may be due to the nature of the business, which may have increased risk management practices due to the heavily regulated industry…
Among the financial services executives in our survey, 49% say their board of directors has an ESG or sustainability committee – an indication of ESG’s importance in the industry. That said, ESG is a broad topic that typically spans multiple items on the board’s agenda. For example, the governance component of ESG generally falls under the purview of the nominating and governance committees, ESG metrics for executive compensation typically sit with the compensation committee, and ESG disclosure reporting is usually overseen by the audit committee. These numbers mean that in some organizations, governance is likely shared across two or more board-level committees…”
It is noteworthy that where management responsibility sits within a company is not a one-size-fits-all matter – it should reflect company- or industry-specific issues (like the regulatory burden/risk). Likewise, how boards structure ESG oversight should also appropriately mirror the multi-dimensional aspect of ESG, especially because directors tend to be only now improving their ESG knowledge.