{"id":133175,"date":"2021-05-13T16:46:46","date_gmt":"2021-05-13T15:46:46","guid":{"rendered":"https:\/\/news.sap.com\/uk\/?p=133175"},"modified":"2023-09-27T15:17:48","modified_gmt":"2023-09-27T14:17:48","slug":"sustainability-in-financial-services-this-is-not-the-time-for-pr-spin","status":"publish","type":"post","link":"https:\/\/news.sap.com\/uk\/2021\/05\/sustainability-in-financial-services-this-is-not-the-time-for-pr-spin\/","title":{"rendered":"Sustainability In Financial Services \u2013 This Is Not The Time For PR Spin"},"content":{"rendered":"

Sustainable investment pays<\/strong><\/h2>\n

The financial fortunes of investors have, in the past, been littered with various trends and failures. Perhaps one of the most noted historically being the South Sea Bubble<\/a>\u00a0of 1720 when many investors lost their fortunes and their lives. Today we now have enhanced regulatory scrutiny in place and greater transparency into financial assets and investments, and the trading of slaves \u2013 thankfully \u2013 is no longer legal.<\/p>\n

While as a society and a global economy we have concentrated on the wealth and economic security of the world, this has often been at the expense of our environment and climate. The poorest countries have suffered most from climate change widening the gap between wealth and poverty. Now climate change and societal opinions are also threatening wealthier countries and there is increased interest from governments, financial institutions, and corporates in better tackling this topic.<\/p>\n

Most significantly, there is increased interest among investors, both institutional and individual, who recognise that investing in more sustainable products and services drives better outcomes for their returns and for the world they live in. In fact, Bloomberg estimates that ESG assets grew to $30.6T in 2018, a value that is up 60% since 2014 and is estimated to hit $53 trillion by 2025<\/a>.<\/p>\n

A McKinsey & Company report – \u201cFrom \u2018why\u2019 to \u2018why not\u2019: Sustainable investing as the new normal<\/em>\u201d<\/a> \u2013 also states: \u2018More institutional investors recognise environmental, social, and governance factors as drivers of value. The key to investing effectively is to integrate these factors across the investment process.\u2019<\/em><\/p>\n

Reliable research by Oxford University<\/a> and McKinsey<\/a> confirms that good sustainability and ESG practices correlate with lower operating costs, better profitability and superior share price performance.<\/p>\n

The role of Financial Services in driving sustainable outcomes<\/strong><\/h2>\n

In driving better outcomes for society and the environment, the role of financial services is far greater than governing and reporting on their own ESG performance. It is to steer sustainable development by environmental and socially conscious financing, underwriting, claims management and investment decisions. Regulatory bodies globally now consider financial services firms to be part of the solution to the problem. Reputational damage is also key as seen from the impact of the Rainforest Action Network \u201cBanking on Climate Change \u2013 Fossil Fuel Finance Report Card\u201d<\/a> report which was published in 2019 and states: \u2018\u2026 the climate crisis demands not just that banks seize the many opportunities for profit in the clean energy evolution, but also that they be prepared to fundamentally redraw their business models away from financing dirty energy. These banks\u2019 clean financing is in any case swamped by the volumes they funnel into fossil fuels.\u2019<\/em><\/p>\n

There have been some earlier adopters of the climate change and diversity responses from large financial services organisations, and two great examples are:<\/p>\n