I followed the World Economic Forum annual meeting in Davos for many years – until I decided very little came out of it that was practical or even followed through on. However, I found a LinkedIn post from Silvia Pavoni, Editor in Chief, The Banker at Financial Times offering a couple good perspectives for ESG/sustainability professionals:
“Risk is not only a bread-and-butter banking topic but also now the safer approach to discussing subjects that have become partisan issues. Risk and materiality, experts have told me, will allow bankers to address anything that has been clumsily placed under the souring ESG umbrella (grouping environmental, social and governance issues) without falling out of political favour in certain jurisdictions — i.e., the US…
The bank CSO struggle. ‘When I got the job, it was all about ‘we need someone who understands the business and connects it to sustainability, and then … we build the team and go [forward]’,’ a European bank chief sustainability officer told me.
‘These days it’s more like, ‘go away, we have enough problems’.”
We talk a lot about materiality and risk on PracticalESG.com – especially hidden aspects that ESG/sustainability professionals must know to avoid trouble. I frequently refer to a study from the World Business Council for Sustainable Development (WBCSD) on the topic which found:
- Although companies have sustainability professionals working to address ESG-related risks and issues, they struggle to get these into risk management discussions.
- Little collaboration exists between a company’s risk and sustainability practitioners.
- ESG risks managed and disclosed by internal sustainability staff are considered less significant than conventional risks, leading to a bias against ESG-related risks.
Financial materiality of ESG/sustainability has its own hidden traps based in financial disclosure regulations and securities law – which is why ESG/sustainability staff must work hand-in-hand with experienced securities counsel. We’ve blogged on a couple of these risks here and here.
Silvia’s point is right on the money – stop using ESG jargon and communicate in business terms. Which leads us to her second comment – the more CSOs can define sustainability in definitive bank business terms, the less they will hear “go away, we have enough problems.” I doubt many bankers will say no to specific, clear and meaningful prospects for improving returns, margins or revenues that are placed squarely in fundamentals already used by the bank.
Members can read more about the business value of ESG/sustainability here. Additionally, members can use the Guidebook Simplifying ESG/Sustainability Business Value and the unique sustainability risk management ROI methodology in our soon-to-be-released new Guidebook – Practical Methodology for Sustainability ROI Using Company-Specific Business Fundamentals.
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