Designing a Sustainability Strategy in Financial Services

What does it take to successfully execute a sustainability strategy?

• A strategy that is anchored on robust data and insight  - Businesses should ensure that their sustainability strategy is anchored on data and insight first and foremost. A sustainability strategy must be based on a robust materiality matrix assessment, which is research aimed at establishing what the most important topics for that organisation are. The assessment typically looks at various sources such as sustainability and annual reports, soft law, hard law, media, news and broader macrotrends to name a few.
  
  
• Adequate resources - Financial institutions will need to choose the operating model that works best for their type of organisation, as well as their specific business activities and culture. A practice that is now becoming quite popular is to have a central team coupled with a team of champions or ambassadors sitting across the various business functions to help embed and deliver the sustainability strategy.
  
  
• The right capability in the right place  - Having the right people with the right expertise and skills is key to successfully delivering on the sustainability strategy. Not only is it necessary to have subject matter experts in place, but upskilling employees across the organisation is also crucial if the desired results are to be achieved. A strong and genuine commitment to sustainability can also help to attract and retain talent and drive employee engagement and motivation.
  
  
• Strong governance - Every financial institution will design its own form of governance depending on where they are on their sustainability journey. Sustainability teams are moving into strategy departments, CEO offices and finance teams to drive further integration between sustainability and the business strategy. This is an area of increasing interest to regulators and investors, who are beginning to examine whether or not financial institutions' governance arrangements are consistent with their sustainability commitments.
  
  
• The right targets - Last but by no means least, it is important to establish targets and key performance indicators, or KPIs, in order to measure progress.

What are some key features of sustainability targets?

• Set around the most material issues for the financial institution in question
• Aligned to the business strategy and priorities – preferably, they should be fully integrated within the business performance measures
• Scientific and rooted in a recognised framework such as Science Based
• Targets Initiative; the Sustainable Development Goals; UN Principles for Responsible Banking;
• Integrated within executive performance and remuneration frameworks
• Finally, they should be long-term and public to drive comparability, accountability, and transparency