The finance industry has become increasingly active in driving sustainability and sustainable development. A substantial common ground is evident between the leaders of the finance industry

  • 90-100% of institutions in the analysis have implemented ESG policies and started reporting to shareholders, adopted a multi-stakeholder approach, started integrating ESG criteria into their decision-making, and are focusing on the SDGs.
  • 80-95% of institutions in the analysis have deeply integrated ESG into business processes with senior level oversight, are looking at a wide variety of ESG criteria, focusing on multiple SDGs, actively participating in various international ESG and sustainability associations, and investing significantly in their employees and communities.
  • 50-75% of institutions have started going significantly further, capturing and reporting detailed ESG metrics, using ESG exclusions to phase out financing or otherwise supporting or participating in harmful activities, making a tangible impact across multiple SDGs.

The leaders in the finance industry have launched a wide array of initiatives across each of the categories in the ‘force for food’ framework outlined in the previous section that are (i) designed to integrate ESG considerations into the institutions’ way of doing business; (ii) driving environmental sustainability; and (iii) care for, support and engage employees, communities, customers and other stakeholders.

The analysis reveals that there is significant common ground that has already been established, and that a new way of doing business is being established across the industry and taken together, this has the potential to deliver meaningful change to how the financial system works. Given the leaders will engender followership, its impact is likely to be magnified.

I.Mindful Conduct: ESG and the Business of Doing Good, From Policy to Practice

There has been 100% adoption of ESG policies and procedures amongst institutions included in the analysis with capital providers considering a broad range of non-financial ESG risk factors when providing financing. Also, c.89% of the leaders of the finance industry have moved away from what in the early days was perceived as a ‘tick-the-box’ approach towards ESG to truly implementing it in practice and c.50% using it to drive organizational objectives such as phasing out financing for activities considered to be harmful. Whether ESG drove an articulation of their values and beliefs or the values and beliefs led to ESG is unclear. What is clear is that each organization’s ESG practices now reflect an identifiable set of values and beliefs.

The adoption of ESG appears to have gained a critical mass in the finance industry, with its leaders using it to drive increased organizational awareness and align its business activities towards achieving their global sustainability objectives. A closer analysis of the ESG related initiatives across those studied reveals how well this is playing out in the industry.

Universal Adoption of ESG Policies and Reporting

100% of the leaders of the finance industry examined in this study have publicly affirmed their commitment to sustainability and managing ESG risks and have adopted ESG (or similar14) policies, with regular reporting to their shareholders on ESG matters. The industry has moved quickly from policy to practice by closely integrating ESG policies into the business; 98% of institutions screen new business opportunities for ESG risks and 89% conduct additional due diligence on those perceived to have a higher degree of risk. 78% of institutions have also established detailed ESG frameworks (or management systems) and 73% track detailed ESG metrics and performance indicators.

Figure 2.1: Adoption of ESG Policies and Practices by the Finance industry

The areas where commonality is low primarily relate to the depth to which ESG is integrated, with 27% of institutions not yet tracking detailed ESG metrics, 22% of institutions not having publicly-disclosed their detailed ESG frameworks and procedures, and 35% of institutions not specifying if they provide ESG training to employees.

Majority are Phasing Out Financing Activities Deemed Harmful

A focus on harmful activities has led to c.50% of institutions in the analysis to use negative screening, in the form of ‘ESG Exclusion Criteria’, which either prohibit or put significant restrictions on financing for certain types of business activities that they consider harmful. There are some clear standards in common based on the local and international compliance requirements, such as not financing forced or child labor, cluster munitions and activities that are banned under international conventions. This has forced rapid compliance by companies needing any type of financing and thereby acted as an effective transmission tool for completely phasing out financing for such activities. Given that not all financial institutions publish exhaustive investment exclusion lists, the actual percentage of institutions that follow the compliance standards laid out above is potentially much higher than the disclosure levels captured below would indicate.

It is noteworthy that c.50% institutions have gone further than this ‘risk management’ approach and are employing exclusion criteria that appear to align business selection to their broader organizational values and sustainability objectives, excluding a range of other business activities that they deem to run counter to their values, beliefs or social objectives. For example, 40-50% of institutions do not finance and/or put significant restrictions on financing activities that drive climate change or impact environmental sustainability, such as thermal coal mines and power plants. Many institutions also restrict activities that they believe to be harmful, such as the tobacco products (50%), gambling (47%), production of civilian firearms (41%), pornography (41%) and alcoholic beverages (34%).

Figure 2.2: Business Activities the Finance Industry is Trying to Limit Through ESG Exclusions

Nevertheless, this leaves c.50% of institutions not following (or at least publishing) an exclusion list beyond the basic local and international compliance criteria, while others have stricter criteria, but still adopt a ‘moderate’ tolerance to activities they deem harmful, screening for it in their ESG criteria but nevertheless allowing them, subject to additional due diligence.

Highest Priority to Climate Change, Governance and Human Rights

The finance industry’s leaders have gone well beyond the negative screening and virtually all institutions are now increasingly integrating a broad range of ESG factors into their investment and transaction decisions with 98% evaluating a counter-party’s climate change impact for example, 92% considering respect for human rights, c.80% looking at health and safety and labor practices, 70-80% looking at corporate governance, business conduct and data security, and other governance standards. This significant broadening of the business selection criteria beyond the profit focus has the potential to have a significant impact on driving change as customers across all sectors are forced to adapt their business models and practices to participate in capital market and access financial services.

Companies across the world looking to raise institutional financing have no choice but to bring their labor practices in line with global best practices in how they treat their employees (e.g., to the International Labor Organization Conventions), irrespective of the local practices. Similarly, with nearly all institutions looking at climate change in their business selection criteria, measurement of impact and tangible mitigation plans are rapidly becoming a requirement for all institutions.

Figure 2.3: Key ESG Factors Considered by Financial Institutions

While there is a high degree of common ground on the ESG criteria, the level to which these issues are integrated into investment and business decisions and what weight they carry over other considerations like financial returns remains unclear in many cases, as does the extent of the guidance and tools provided to employees to evaluate the issues.

Conscious Incorporation of ESG Factors to Promote Activities for Good

An increasing number of finance industry leaders are going beyond the use of exclusions lists and ‘negative screening’ to the active integration of ESG and sustainability factors into investment decisions-making. Among the finance industry leaders, at least US$12.5 trillion in assets under management (or 12% of the total assets) consciously incorporate ESG factors into their investment decisions to promote activities for good. ESG factors are now being integrated across various types of financial products, ranging from ESG mutual funds (including both actively managed funds and passive or index funds) that focus on investing in ESG leaders within sectors, thematic funds that focus on specific sustainability issues (such as women’s empowerment, water or sanitation, among various examples), impact funds that look to invest in enterprises that are delivering a positive social and/or environmental impact, SDG-aligned hedge fund portfolios for institutional investors that want to ensure their portfolios are aligned towards sustainability objectives, and many others.

Figure 2.4: Active Incorporation of ESG In Investment Strategy

Integrating ESG with Core Business Processes

The leaders of the finance industry are closely integrating an analysis of the ESG factors above into their core business processes. Each segment of the industry is pursuing this objective in ways that suit them. In the asset management space, passive managers, in their mutual funds, look to score public companies across various ESG parameters which feed into their asset allocation decisions, and monitor these metrics through the course of the investment. Active investment institutions, such as some of the leading pension funds, hedge funds and sovereign wealth funds, conduct ESG risk assessments and due diligence prior to investing and closely monitor these risks post-investment. Similarly, banks have adopted a strategy of looking at the ESG impacts of their borrowers and companies whose financings they are looking to underwrite in deciding the risk exposure of loans and deciding which mandates to take.

Embedding ESG into core business processes and decisions is typically supported by senior-level oversight, with 84% of the institutions in the dataset (accounting for c.90% of total assets and AUM) having established independent oversight and governance structures for ESG, with support from senior management and the board.

Figure 2.5: Best Practices for ESG Integration in Core Business Decisions, Oversight and Governance

While over 95% of banks and asset managers have publicly disclosed ESG processes, these tend to differ widely in their depth and scope, with some institutions integrating these processes systematically across the organization while others do it in silos (e.g., by regions or product units). Though most investment funds tend to follow relatively rigorous ESG processes, c.17% of them either do not have these or have not yet publicly disclosed their level of ESG process integration.

Backing Multiple Collaborations to Agree on International Market Standards

Over the last several years, the finance industry’s leaders have participated in international associations such as the UN’s Principles of Responsible Investing (UN-PRI), the UN Global Compact and the Sustainability Accounting Standards Board (SASB), which are helping to establish a de-facto standard. They have also incorporated international frameworks and conventions (such as the IFC Performance Standards and the ILO Conventions) into their ESG policies and practices to manage compliance. International institutions have done the hard work of attracting the finance industry leaders to supporting these important initiatives (for example by attracting 94% of the industry leaders by total assets to the UN Principles of Responsible Investing initiative) and now the industry is raising the bar for others to adopt these standards.

Figure 2.6: Financial Industry’s Participation in International Frameworks and Conventions

II. Caring for the Planet: Finance as a Driver of Climate Action and a Sustainable World

Climate change has emerged as the major issue for the planet and the world’s citizenry is increasingly realizing that we are at a defining moment in how this plays out. After more than a century and a half of industrialization, deforestation, and large-scale agriculture, quantities of greenhouse gases in the atmosphere have risen to record levels not seen in three million years, largely driven by our dependence on fossil fuels, leading to rising global temperatures, shifting weather patterns and irreversible changes in major ecosystems.

The UN has been at the forefront of global climate action and environmental sustainability, producing the United Nations Framework Convention on Climate Change (UNFCCC) which have led to the Kyoto Protocol (1995) and the Paris Agreement (2015) bringing 196 nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.

These efforts have been complemented by multiple initiatives in the private sector to implement the changes in energy production and consumption, industrial manufacturing, supply and distribution and consumption required to execute a sustainable climate transition. The finance industry looks to have embraced the challenge of climate change wholeheartedly, making environmental sustainability core to the allocation of capital and its own business operations.

Working with International Associations to Help Address Climate Change

The leaders of the finance industry are actively participating in major climate and sustainability related associations that are establishing common standards for the industry and promoting financing for sustainability in various forms. This study finds that c.81% of the leaders in this study are supporters of the Task Force on Climate-Related Financial Disclosures (TCFD) and 70% disclose their carbon footprint metrics through the Carbon Disclosure Project (CDP). Other associations, such as the Green Bond Principles (which defines the guidelines for the issuance of green bonds) and Climate Action 100+ (a network of investors committed to mitigating climate change), amongst several others, have attracted a large proportion of the industry’s leaders. These and other key international associations that are helping the financial industry collaborate with each other and various other stakeholders to address climate change and mobilize sustainability financing are listed below:

Figure 2.7: The Financial Industry’s Participation in International Climate Associations

Leading Financial Institutions Mobilizing More than US$240bn Annually for Clean Energy

The International Energy Agency estimates that limiting the rise in global temperature to less than two Degrees Celsius will require an average investment of US$3.5 trillion in the energy sector every year until 205015 to restructure existing energy assets and construct new renewable ones. The financial industry can play a critical role in mobilizing and allocating the capital required to ensure the global transition to a more sustainable energy production and consumption model and can help mitigate the potentially catastrophic impact of climate change.

Many of the leaders of the finance industry profiled in this work have to date committed to mobilizing capital in support of climate action, specifically for the development of clean energy in the form of renewables and associated technologies like smart grid and energy storage solutions, with US$245 billion16 in financing provided during 2019, with US$137 billion in green bonds issued and US$ 108 billion in other renewable energy and low carbon project finance committed.

Figure 2.8: Total Clean Energy Financing in 2019

The US$245 billion commitment represents two thirds of the total global clean energy investment of US$363 billion in 2019,17 indicating that industry leaders are dominating this market and leading the way for the rest of the industry to follow. However, the cost of full decarbonization by 2050 is estimated at US$50 trillion, and so the current level of spending will not avert climate change, preserve the rainforest and prevent environmental disasters.18 To fully achieve these goals with energy carbon neutrality will require average annual spending at nearly 5x the current level for the next 30 years indicating that the current efforts represent only the tip of the proverbial iceberg.

Setting an Example by Further Reducing its Carbon Footprint

Though the industry is not a significant direct contributor to global CO2 emissions, industry leaders are nevertheless looking to lead by example by rigorously measuring their direct and indirect carbon footprints, and actively seeking to reduce it. While 97% of industry leaders have stated plans to reduce their operational carbon footprints, 79% of the industry leaders follow the Greenhouse Gas Protocol Accounting and Reporting Standards which require them to report total annual carbon emissions across three different scopes (direct, indirect and value chain) under a common measurement and reporting framework, and these leaders have adopted various measures to mitigate their own direct and indirect footprint, reducing their direct emissions by c.4% over the last year and indirect emissions by c.7%.

Figure 2.9: Change in Industry Leaders’ CO2 Emissions (mt) From 2018 to 2019

While c.80% of institutions are moving to measure and reduce their carbon footprint, it is important to keep in mind that the finance industry’s carbon footprint is negligible, hence these actions will only be a small part of what needs to be a broader strategy which systematically incorporates environmental and climate considerations into the way of doing business.

III. Compassion for All: Caring for Employees, Communities and Other Stakeholders

Virtually all institutions in the analysis have moved from their historical focus on shareholder primacy and risk-adjusted returns towards a greater focus on and care for all the stakeholders in its ecosystem including its employees, customers, communities, suppliers, regulators and the government. This multi-stakeholder approach, which c.90% of the data set constituents have publicly re-affirmed, is based on the growing awareness that self-interest and community interest are not just aligned but fundamentally the same thing, a view increasingly supported at the highest levels of financial organizations (see examples of statements from CEOs below).

Figure 2.10: Views Expressed by Selected Industry’s Leaders on Stakeholder Engagement

It is worth noting that the translation of these commitments to stakeholder interests into actions and tangible results is still work in progress. Public companies, whether financial institutions or others, continue to be predominantly judged on traditional shareholder metrics which impacts the priorities of the organizations and their leaders, whose success remains narrowly measured. If current trends continue, this will change sometime in the not-too-distant future.

Near Universal Support for their Communities

The financial industry is investing significantly in the communities it serves, both in terms of mobilizing its core business to provide capital where it is most needed, particularly in the form of low-income housing and loans as well as through corporate social responsibility (CSR) and charitable giving programs.

‘Community’ financing, in the form of housing development and finance, financial inclusion initiatives and small business and low-income loans is one of the biggest opportunities for the finance industry to have a direct impact on broader stakeholders to increase social good. Total ‘community financing’ by industry leaders crossed US$63 billion last year, with significant capital deployed for home ownership through low-income mortgages and affordable housing, community development finance and small business loans among others. The ongoing growth and breadth of community finance activities points to the potential impact of the industry in leveraging its core business as a ‘force for good’.

Figure 2.11: ‘Community Financing’ by Industry Leaders

The finance industry’s leading institutions have taken an active role in corporate social responsibility, with the 51% of those examined disclosing their CSR activities, spending a combined US$1.4 billion annually supporting a vast number of organizations and initiatives across critical areas, including healthcare, education, arts and culture, disaster relief and other types of community development interventions. Through these programs and initiatives, the financial industry is looking to make a direct impact on the lives and livelihoods of the underserved and engage communities directly in addressing systemic local issues at scale.

2.12: Cumulative CSR Spending by Industry Leaders

Community financing by industry leaders is unsurprisingly orders of magnitude greater than their disclosed CSR spending evidencing the fact that the finance industry’s impact primarily rests on its role as an allocator of capital. Moreover, with affordable loans and mortgages representing only a fraction of finance industry leaders total lending activities, there is significant room for further growth, with the finance industry potentially addressing issues at scale in a targeted fashion.

High Priority Support for Diversity and Inclusion Under Implementation

As people-driven businesses, leaders in the financial industry demonstrate through their initiatives that they recognize the importance of the principle of diversity and inclusion and almost all institutions having clear policies to encourage diversity in hiring, and equal treatment of all employees irrespective of their gender, ethnicity or race, disability, or sexual orientation. Despite its perceived legacy of being a male-dominated profession, 32% of the directors of the institutions in the study are women (vs. 23% for Fortune 500 companies as a group19) and women comprise in total 49% of the aggregate workforce for institutions that have reported on this. No doubt challenges remain, but the direction of change seems clear.

Furthermore, financial institutions have increasingly moved from the view of employees as ‘human resources’ to invest more broadly in their people by focusing on wellness, work-life balance, mental health and mindfulness, having recognized that these initiatives provide direct benefits to their business in the form of increased productivity, retention, satisfaction and loyalty to the company’s culture and values. Indeed, 73% of the industry leaders in the analysis offer employee wellness or mental health services and over 25% are offering mindfulness programs to their employees

Figure 2.13: High Priority Support for Diversity and Inclusion Under Implementation

Finance industry leaders clearly recognize the need to engage and retain employees in order to drive retention and productivity. However, there are varying degrees of success and outcome orientation, and the industry still has some ways to go. 27% of institutions do not disclose their anti-discrimination policies with regard to people with disabilities or sexual orientation for example, and some institutions, in spite of their commitments to ESG and sustainability, still have few or no women on their board of directors.

Engaging Various Stakeholders Including Customers, Governments and Regulators, and Others

There is evidence in the organizations examined of a growing importance of stakeholders beyond shareholders and what is for most of them a long-standing commitment to their people and their local community. In 2019, the Business Roundtable issued a new statement on the purpose of a corporation, signed by 181 CEOs who have committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities, and shareholders. Members of the finance industry are among the leaders of this shift from shareholders to stakeholders. c.90% of the industry leaders in the analysis publicly disclose their initiatives to engage various stakeholders beyond the employees and the communities they serve, including customers, suppliers, governments, regulator and their peers – in order to create a continuous positive feedback loop that supports the development of better policies and programs and supports sustainable growth and the adoption of a corporate culture that values sustainability, environmental and social responsibility across the organization. Illustrative initiatives that the financial industry is using to engage these stakeholders are summarized below.

Figure 2.14: Initiatives Focused on Engaging with the Company’s Broader Stakeholder Group

The finance industry needs to engage various stakeholders in the ordinary course of business, like any other sector. Therefore, it is yet unclear whether these initiatives represent a fundamental shift for the industry, rather than just an incremental uplift in engagement from business as usual.

Further it is important to recognize that the finance industry is among the most active sectors engaged in lobbying to seek favorable terms from governments and regulators.20 These lobbying efforts are generally undisclosed and so this raises questions on whether these are in pursuit of policy and legislation that are in the industry’s interest at the expense of broader stakeholder groups.

A ‘Force for Good’ Supporting the Sustainable Development Goals

The three elements laid out above – mindful conduct through ESG, caring for the planet through sustainable finance and compassion for all through stakeholder impact- form the basis of the finance industry acting as an impactful ‘force for good’. The UN SDGs are the most comprehensive set of sustainability goals in the world today that seek to address its challenges and point to what a sustainable future for it might look like. Accordingly, they represent a crucial benchmark by which to measure the impact of an institution or an industry as a ‘force for good’. In the case of the finance industry, each of the three elements of their engagement promotes sustainability in the broadest sense: ESG includes the promotion of peacefulness, fairness and justice, environmental sustainability includes environmental protection and fighting climate change, and stakeholder engagement includes tackling social issues like poverty and inequality.

Finance Industry Becoming a Champion of the UN SDGs

An increasing number of industry leaders are explicitly using the UN SDGs to focus (and manage) their sustainability and sustainable development efforts and to communicate these, both internally and to external stakeholders. Many companies have identified specific SDGs and have set a series of benchmark targets against which to measure their contribution and sustainability impact, as well as to identify potential areas of focus for new initiatives to be launched.

Current Priorities on the SDGs

The analysis shows that leaders in the industry have focused on the goals where they have the highest potential to make an immediate and effective difference, and on the goals of the highest interest to the communities that they serve.

Figure 2.15: The Finance Industry’s Explicit Support for the SDGs21

SDGs that financial institutions feel accountable for, in particular the issues local to their community (issues of inclusion, rights and welfare) and the wider planetary considerations in so far as it affects their operations (climate change is now recognized widely as one of those) have taken priority. The positive news is that c.84% of the institutions in the analysis (representing c.92% of the total assets in the analysis) explicitly focus on climate change, and c.55-65% focus on SDGs around inclusion such as education and healthcare. The downside is that less than a third is explicitly focused on zero hunger, a problem most prevalent in least developed countries where finance industry leaders have only minimal footprints and for which few the industry has not yet developed their commercial rationale for addressing the issue. This ‘local’ rather than ‘holistic’ approach clusters industry support in a few goals and risks leaving key geographies and other goals underfunded.

A Whole View: The Idea of ‘Force for Good’ Applied to the SDGs

Stepping back however, the SDGs represent the world’s most comprehensive formulation of what such a sustainable future might look like, covering 17 distinct environmental, social, political and technological goals covering 169 specific targets and 232 individual indicators through which to measure progress and their potential achievement. Given this breadth, virtually every ‘force for good action’ or initiative taken by the finance industry can be viewed from the lens of advancing the SDGs, regardless of whether the SDGs are being consciously targeted or not. For example, funding clean energy projects contributes to both Goal 7: Affordable and Clean Energy and to Goal 13: Climate Action, participating in industry associations that promote sustainability contributes to Goal 17: Partnership for the Goals, and even simple actions like replacing single use straws in canteens can contribute to multiple goals.

If one were to look at the totality of the finance industry’s initiatives from the perspective of how they correlate to the SDGs, in the broadest sense, all of their ‘force for good’ actions are of relevance to the UN and its strategy and roadmap for financing sustainable development. The table below captures the link between industry leader’s force for good engagement and the SDGs supported.

Figure 2.16: Broad Support of the SDGs by the Finance Industry

The Emerging Common Ground is Substantial

The finance industry leaders have established a broad common ground on ESG, sustainability and stakeholders. This points to a convergence of perspective being followed through in hard policies and practices. Ultimately these either already promote or will promote the growth of mindful conduct, caring for the planet and compassion for stakeholders in pursuit of the common good.

The detailed analysis of the leaders of the finance industry as part of this work shows a high degree of common ground. The likely direction of travel for the industry, as well as to the industry’s position and trajectory as a 'force for good' in the world, are clear. The detailed analysis of the initiatives and programs across the ‘force for good’ categories support ten key conclusions on the common ground that has been established in the financial industry as a whole:

  1. 90-100% Have Integrated ESG Policies Represent the Minimum Bar for the Industry. Any market-leading financial institution needs to have more than an ESG policy; they need to have integrated ESG systems and processes, a sustainability-oriented focus, empowered employees, and a respect for all stakeholders to be a high performer in this area. This is no longer a matter of choice, 90-100% of industry leaders in this analysis are already doing all these things (and in most cases many more) thereby setting the bar for all other participants in the industry and a high bar for those that wish to become industry leaders.
  2. 78% of Institutions Have Gone Further in Institutionalizing ESG and Sustainability. A substantial majority of institutions in the analysis have not only adopted policies and processes, but have started to capture detailed ESG metrics, implemented detailed ESG frameworks, and have started to focus on making a tangible impact across specific SDGs through their core businesses.
  3. 40-50% of Leaders Use ESG as a Mechanism to Achieve Their Goals. Many industry leaders are further using ESG to drive broader organizational and societal goals beyond the environment or immediate SDG goals, for example with 41% banning or restricting financing for the production and sale of civilian firearms, and 30-45% of institutions having similar policies for gambling, pornography and alcohol.
  4. c.98% of the Industry is Participating in One or More International Associations. Industry leaders are actively collaborating through various international associations for ESG and sustainability, such as the UN-PRI, and thereby helping to establish common market standards and best practices for the industry.
  5. Industry Leaders have Mobilized US$245 Billion for Environmental Sustainability Financing in 2019. The 63 institutions in the analysis alone have mobilized US$245 billion for sustainability related investing through various instruments in 2019, or c.67% of the total sustainability investing globally. In doing so, the industry has assumed a leading role in the global effort to mobilize financing on the scale necessary.
  6. 97% of Industry is Seeking to Reduce its Carbon Footprint. Finance industry leaders are leading their own and other industries by example by measuring and actively looking to reduce their own carbon footprint. While this may have a negligible impact on climate change on its own, the signaling effect of it to corporate peers has the potential to lead to the widespread adoption of a similar approach in other (more polluting) sectors as well
  7. c.90% of Leaders Have Pledged a Commitment to All Stakeholders. Most of the industry’s leaders have publicly adopted a commitment to embrace and engage various stakeholders (including customers, communities, governments and regulators, and corporate peers) pointing to the transition away from the industry’s historical focus on shareholder returns
  8. 95% of the Leaders Support Their Local Communities, US$1.4 billion Invested into Communities Annually. As part of its multi-stakeholder approach, industry leaders have increased their focus and spending on programs that address systemic issues at the community level, giving back in terms of education, healthcare, arts and culture and development of underprivileged communities.
  9. 80-98% of Institutions Have Focused on Employee Diversity, Inclusion and Well-Being. The overwhelming majority of industry leaders have adopted anti-discrimination policies and followed them through in practice (by increasing the proportion of women employees and directors for example) and launched initiatives to improve employees’ well-being beyond standard healthcare, to include mental health and mindfulness programs too.
  10. 13 of 17 SDGs Specifically Prioritized by Financial Institutions. The finance industry has begun to explicitly champion a growing number of the SDGs, in particular those relating to climate change and environmental sustainability, with many setting organizational targets to contribute to the goals and tracking progress against these with regular reporting.

The emerging common ground being established by industry leaders points to an increasing alignment of the industry with the challenges facing the world and sets the stage for them to act as a ‘force for good’. Importantly, it also sets the bar in terms of standards that the broader finance industry will need to meet if it is to follow their lead and act as a catalyst for change. Although the financial institutions are mostly acting individually, particularly given they are extremely competitive, the substantial common ground points to three important implications, firstly, a de facto standard is emerging for leadership and it includes addressing the world’s major issues, secondly, the industry is reaching a tipping point since the direction of travel is unlikely to be reversed, there being no reason to do so and, thirdly, the self-sustaining growth of these initiatives over time leading to systemic changes in how and where capital is allocated and returns are rewarded.

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End Notes

  1. 14. Such as responsible investing, responsible lending or sustainability policies
  2. 15. Source: World Bank Article, “Climate Finance”
  3. 16. This includes an assumption that for six companies that have only disclosed renewable energy AUM for six companies totaling c.US$42 billion has been held for a period of 10 years and thus, the capital mobilized for clean energy financing in 2019 is calculated by dividing the total clean energy AUM over a period of 10 years
  4. 17. Source: Bloomberg Clean Energy Investment Trends 2019
  5. 18. Source: Morgan Stanley Research: The Race to Zero Emissions; Nov 25, 2019
  6. 19. Source: Deloitte and Alliance for Board Diversity (ABD) Multi-Year Study, “Missing pieces report: The 2018 board diversity census
  7. 20. Finance industry lobbying for example is estimated to total EUR123 million annually at the EU level (source: Corporate Europe Observatory, Austrian Federal Chamber of Labour), and US$534 in the United States (Source: Center for Responsible Politics)
  8. 21. Initiatives based on institutions’ own reporting of activities supporting specific SDGs