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Green Bridge Advisory

Financial Services

Environmental social and governance forces make it an imperative for the financial and professional services to transform

Integrating environmental social and governance (ESG) strategies – specifically climate change risk – have risen to the top of the agenda for the financial sector – with even more heightened urgency due to mandatory disclosure.

Investment professionals, asset managers, c-suite business leaders, treasurers, investor relations, and finance teams are grappling with many complex sustainability issues, from climate change risk and disclosure to green finance opportunities.

Some will choose to lead on ESG issues and try to stay ahead of competitors and regulators, and some will choose to be fast followers, but it’s critical that each organisation develops a coherent long-term strategy to meet its goals. The goalposts are constantly moving, what was market-leading in your long-term planning a few years ago may now only be enough to comply with new and emerging regulations.

Sustainability Issues

Financial companies and professional services are increasingly responding to stakeholder demands to drive a more sustainable economy by articulating a corporate purpose and explaining how that purpose will drive toward sustainable investment decisions. Executing this is not easy for large, complex organizations. To succeed in delivering a sustainable future, senior leaders must embrace corporate purpose and make sure their financial and professional institutions follow through on purpose statements with concrete actions.

Regulators increasingly see climate change as a systemic risk to the global financial system, and most central banks have taken steps to measure their exposure to it. Government penalties for not complying with climate regulations are therefore becoming more common, as we are seeing with the upcoming mandatory climate-related disclosure in Nigeria.

Many companies will measure and target reductions to Scope 1 and 2 emissions. Measuring and reporting on Scope 3 emissions, however, is far more complex. Scope 3 emissions include a corporate’s upstream and downstream value chain (e.g. suppliers and distributors), as well as business travel leased assets, and even bank lending exposure in the case of the financial sector.

Scope 3 and will often represent 50% or more of a company’s true impact.

Measuring and reporting on Scope 3 emissions allows financial institutions to make more sustainable decisions. The exercise allows companies to better understand which partners and vendors take sustainability seriously. This transparency and decision-making will be vital for corporates as global climate regulation continues to rise. Many investors already expect corporates to outline reduction targets. This pressure will only increase as sustainable investing strategies continue to represent institutional and retail inflows.

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