Financial Services in 2022: The year for green action

Emily Rushgrove (She/Her), Associate Director—Corporate & Financial

From pledges to action

In 2021 we saw businesses collectively sign hundreds of pledges, accords and deals to tackle the climate emergency. In 2022, they will have to act.

While some are already doing just that, they all too often remain trailblazers in their fields. That can’t last long.

As my colleague Michael Hartt recently noted, just a few years ago climate denial was a boundary line to being seen as credible, now greenwashing has become one too.

To stave off any such accusations and to play a meaningful, positive role in protecting our planet’s future, all businesses need to act now. It can’t just be down to the few. People are watching and those who fail to act will erode their credibility and authenticity; commodities brands can ill afford to lose.

2022 will be pivotal

The tidal wave of activity and awareness around tackling climate change is largely consumer-led. The momentum has been building and 2022 will be pivotal.

Indeed, in our recent “The future of ESG and sustainable investing” report we explored how ESG has entered mainstream consciousness in the past five years. Our findings highlighted 18–34-year-olds are driving the trend forward, with 90% having taken some ethical action in their consumer or investment behaviour in the last year.

We should expect this kind of action to accelerate as more consumers across the generations learn about the climate crisis.

Alongside consumer demand, regulators are also pushing financial services businesses to act.

The Financial Conduct Authority now requires regulated firms such as larger asset managers and life insurers to make climate-related disclosures. The changes endeavour to increase transparency and better inform asset pricing and capital allocation. These rules will apply to smaller firms in due course.

This month (January 2022) also sees additional disclosure requirements from the European Commission’s Sustainable Finance Disclosure Regulation (SFDR) come into force. This impacts asset managers and, like the FCA’s changes, is intended to drive transparency around sustainability.

Financial services: problem and solution

Certainly, consumers expect the financial services industry to play its part by supporting and financing solutions to climate change from renewable energy projects to emerging climate technologies or green industries.

Testament to this is the finding in our most recent Authenticity Gap report, that consumers have higher expectations of investment businesses’ focus on societal outcomes, which include care of the environment, than they do of businesses more generally.

Of course, it’s not just about new finance, it’s also about existing relationships. Some major players remain exposed to fossil fuels by financing new exploration and ongoing production.

Consumers and shareholders should be expected to turn up the heat on financial services businesses to cut this funding. A failure to do so will be bad for the environment and for business, leaving them reputationally scarred and financially at risk of being left exposed to undesirable assets as the renewable transition accelerates.

Undoubtedly, building and then retaining credibility and authenticity on “green” issues will take commitment and energy. It’s not only about creating a communications buzz around successfully meeting a green target.

There’s a strong argument to be made for the power of taking customers on the journey towards those goals, to finding solutions. If they see incremental progress, they are more likely to believe in the authenticity; the reality of it. And authenticity drives trust and lasting, positive perceptions.

That journey could include regular updates delivered through earned media engagement, informative social media content and advertising strategies that help bring the transformations to life at every stage. It’s about telling the story, showcasing a desire to improve and learn and to do so even when it’s a little uncomfortable or part of an ongoing developing process.

So, while there is credit due to businesses that have pledged to tackle the climate emergency, there are greater rewards to be reaped by those who lead the way in taking tangible action now. Building trust, building loyalty, driving preference while protecting planet and profit.

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