Driving Sustainability as a Financial Director

The financial sector will play an outsize role in the global effort to become carbon neutral, and FDs will be the leading facilitators of change, driving innovation and ethical financial decision making on the ground.

The international commitment to climate justice - typified in the Paris Agreement in 2015 - will only be successful through wholesale changes in how institutions, governments, sovereign wealth funds and enterprises finance themselves. Indeed, many thousands of companies, and many millions of workers, are already doing so, supported by macro-economic platforms such as G20 Sustainable Finance Study Group, the United Nations Environment Programme Finance Initiative, and the International Platform on Sustainable Finance.

On a smaller scale, everything from solar panel subsidies for private homes, to turning street lights off at night, are creating cultures of environmental mindfulness, driven in large part thanks to better sustainable capital alignment, and diligent leadership at state, county, town and region levels. But it’s not all about savings - crucially, a generationally defining move of capital has ushered in a new wave of “green” investment, and multi-industry sustainable growth is possible. For example, by making drastic changes to facilitate circular economic practices in manufacturing (the 6 Rs), or closing the door on non-green investments, companies, funds, directors, boards and VCs are quite literally putting their money where their mouth is. But this shift to eco-investment is not equitable.

While many companies transition to carbon neutrality, many, many others are dragging their heels, more often than not because of one thing - sustainable economies of scale, difficult eco-financial commitments, and lack of investment in sustainable alternatives within their industry. Either people can’t access alternative means, or they don’t have the money to pay for what green schemes do exist. Enter, the humble Financial Director. FDs are judicious financiers, savvy business people, number crunchers and hyper-communicative team leaders. FDs have to both provide staple guidance and usher in changes to financial arrangements for their enterprise, and the green revolution is throwing up a lot of opportunities within the financial space.

So how can Financial Directors drive sustainability?

We think it is wise to consider an effective sustainable financial strategy across three impact metrics - the human, the company, and the industry.

The Human Impact

As the financial head of your enterprise, you have to embody the shift to sustainable financing. You can do so through more than simply advising clients to go green - you can also impact workforce engagement, effective L&D and elevating sustainability to sit alongside auditing and internal controls as pillars of financial prudence. You can do so through a variety of means, such as:

• Engaging your HR and recruiter team to encourage a “green” employer brand,
• Training and investing in Green L&D for client-facing financial team members, especially in regard to regional or country-wide efforts to move to circular economies,
• Develop new, novel metrics within operational reporting to highlight and elevate internal and client-facing green initiatives,
• Rejig and redevelop top-line annual company objectives, in line with eco-commitments, and feed these into staff performance analysis internally,
• Create diligent Green Audits, both for your team and your clients, to better communicate and demystify what sustainable financing means.

Focus on the human - your team, your clients, what they want to see, and how your financial leadership will help them do better for the environment.

The Company Impact

Consider this - in your recruitment strategy for 2022, are you aware of demographic understandings of sustainability? Do you consider it a point of contention for certain parts of your workforce? Well, for Gen Z workers, it’s a hot priority. Ethical practice - your Environmental and Social Governance output - is your company brand. The impact sustainable practice has on any brand and any company perception is overwhelmingly positive, if communicated well. Plus, consider the weight of investment and expenditure in ESG business - as of July last year, “Sustainable investments total $35.3 trillion, or more than a third of all assets in five of the world's biggest markets”. This shift to green means accounts stay in the black, and your company will build an employer value proposition of high standing.

The Industry Impact

Which leads neatly onto Industry norms and expectations.

• “An overwhelming majority expect sustainable financial services to become the norm (93%) – and almost half expect this to be the case by 2025” - Global Risk Regulator
• “ESG (environmental, social, governance) has risen to the top of the regulatory agenda” - KPMG
• “Climate change and other environmental, social and governance (ESG) matters are increasingly central to the activities of listed companies, regulated firms and consumers” - Financial Conduct Authority
• “In September 2021, the UK Government raised £10 billion for green projects through the sale of the first green gilt, the largest inaugural green bond issuance by any sovereign” - UK Gov

Financial ESG goes beyond trends and borders - it’s both expedient and necessary to diversify holdings, and engage with sustainable practice. Governments, auditors, and governance bodies are all aligned. Financial Directors may not individually be able to shift whole markets - but together, they can influence boards, networks, employees and cultures. Therein lies the power of the FD - at the front line of financial change, flying the flag for a better, more sustainable way of doing business.