As investment banks and financial services face growing pressure to address climate change, supply chain sustainability can play a key role

March 20, 2024

Operational leaders at investment banks and financial services organizations are fully aware of the growing importance of establishing sustainability and net zero goals, and the scrutiny their industry is facing. Climate change, carbon footprint, net zero and the “E” in Environmental, Social and Governance (ESG) are no longer just buzzwords, but critical issues that are impacting the way companies operate and the expectations of their clients, employees, and investors. According to the Deloitte 2023 CxO Sustainability Report, 61% of C-suite executives in the financial services sector believe climate change will have a very high impact on their organization’s strategy and operations over the next three years[1]. This ranks as the second highest concern following only the general economic outlook. This is not surprising, given the increasing pressure from regulators, clients, and employees. However, to be truly authentic, operational leaders at investment banks and financial services should strive for a sustainability agenda not just to meet external demands, but to preserve them.

Sustainable investing is booming, but is it greenwashing or real change?

Sustainable investing is growing. According to the 2022 Global Sustainable Investment Review by the GSI Alliance, sustainable assets under management globally reached $30.3 trillion in 2022[2], driven by demand from both individual and institutional investors. Also, according to the fifth annual “Real Assets Study” from Aviva Investors on Climate Change, 93% of global institutional investors actively consider ESG and sustainability in their investment decisions, with 17% considering it a critical factor[3].

However, the investment banking and financial services industry has continued to face criticism for not doing enough to combat climate change, with some firms being scrutinized for funding industries negatively impacting the environment, such as fossil fuel projects, or “greenwashing” with ambiguous net zero carbon emission targets that lack specific action plans. Also, even though many financial services organizations are promoting sustainable investment products, some have been accused of simultaneously being linked to projects that are detrimental to the environment, including fossil fuel, deforestation, mining, and transportation, sparking concerns about the genuine depth of their commitment to climate action. This incongruence raises questions about the true purpose of sustainability initiatives within the industry and underscores the need for greater transparency and concrete action towards achieving genuine net-zero goals.

Investors and talent seek firms aligned with climate goals

Clients are increasingly requiring firms to have clear environmental targets and a carbon reduction plan and are even asking to see statistics and carbon footprint scores. A 2023 Survey from McKinsey found that 41% of institutional investors are considering reducing their exposure in financial and insurance companies due to environmental, social, and governance concerns, and 85% of chief investment officers surveyed state that ESG is an important factor in their investment decisions[4]. This suggests investors are increasingly evaluating companies’ climate strategies, which could also include aligning with sustainable supply chain providers.

Investors want to see clear objectives aligned with reducing emissions to a minimum in line with international targets set to reduce the earth’s temperature rising to no more than 1.5 degrees, as outlined in the Paris Agreement. Adhering to non-arbitrary targets from initiatives such as The Science Based Target Initiative (SBTi) provides a consistent and comprehensive set of targets to help companies achieve this goal.

Talented candidates also want to work with organizations who are doing the right things around climate change. In Deloitte’s Global Millennial and Gen Z survey from 2023, Over half of Gen Zs (55%) and millennials (54%) say they research a brand’s environmental impact and policies before accepting a job from them. One in six Gen Zs (17%) and millennials (16%) say they have already changed job or sector due to climate concerns, with a further 25% of Gen Zs and 23% of millennials saying they plan to do this in future[5].

Supply chain sustainability plays a key role in a net zero strategy

Investors also want to see how financial services organizations are monitoring and regulating their scope 3 greenhouse gas (GHG) emissions, which encompasses all indirect emissions that occur across an organization’s value chain, outside of their direct control or ownership. Therefore, collaboration across the value chain, including sharing goals and successes, is also becoming increasingly important. Achieving net zero is not just about reducing emissions from your own operations, but also about considering the full value chain of your organization, including supply chains. This is where working with suppliers and outsourcing business partners committed to providing environmentally sustainable products and services can be a significant advantage.

Williams Lea is working with a climate consultancy firm called EcoAct to map its route towards net zero and is looking into using science-based targets aligned with the SBTi. Williams Lea already sources 100% renewable electricity for all the sites in the United Kingdom that it manages and is exploring opportunities to expand this out globally across its business. Williams Lea has also joined the UN Global Compact and has selected sustainable development goal 13, which is to take urgent action to combat climate change and its impacts.

As supply chain due diligence and client scrutiny are key, partnering with a business services outsourcer like Williams Lea can help investment banks and financial services firms minimize their carbon emissions by contributing to a supply chain aligned with improving sustainability and reaching net zero goals.

 Sustainability initiatives need to be thorough and authentic

Setting sustainability and net zero goals is not only the right thing to do for the environment, but it is also a smart business decision. By reducing emissions, considering the full value chain, and partnering with suppliers that are committed to providing environmentally sustainable products and services, investment banks and financial services firms can position themselves for success in a world where sustainability is increasingly important, while also have a positive impact in terms of attracting and retaining talent.

However, it’s important to note that the pursuit of sustainability cannot solely rest on external factors such as regulatory demands, client expectations or talent recruitment. While these elements present compelling reasons for action, a truly transformative journey necessitates a core belief in the inherent value of sustainability. As responsible stewards of this planet, all organizations need to embrace a genuine connection to our environment, paving the way for a healthier future for ourselves and generations to come.

To find out more about Williams Lea’s commitment to combatting climate change, read Williams Lea joins UN Global Compact; commits to prioritizing sustainability.

[1] Deloitte 2023 CxO Sustainability Report: https://www.deloitte.com/global/en/issues/climate/content/deloitte-cxo-sustainability-report.html

[2] Global Sustainable Investment Alliance Review 2022: https://www.gsi-alliance.org/wp-content/uploads/2023/12/GSIA-Report-2022.pdf

[3] Sustainability considerations a factor for nine-out-of-ten Real Assets Investors – Aviva Investors Real Assets Study: https://www.avivainvestors.com/en-us/about/company-news/2023/01/aviva-investors-real-assets-study-2023/

[4] Gelb, McCarty, Rehm, and Voronin, “Investors want to hear from companies about the value of sustainability”, September 15, 2023: https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/investors-want-to-hear-from-companies-about-the-value-of-sustainability

[5] Deloitte 2023 Gen Z and Millennial Survey, 12^th Edition: https://www.deloitte.com/global/en/issues/work/content/genzmillennialsurvey.html