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2 Ways Finance Can (and Should) Address Sustainability in 2021


by Rodney Laws

From the impact of climate change to the fact that industry professionals can (and should) take personal responsibility for being more sustainable, here’s why sustainability is a huge issue for corporate finance in 2021.

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People have known about the damaging effects of climate change since at least the 1960s, making the need for sustainable approaches to life and business a known issue for well over half a century.

Corporate finance is a unique industry (as all are) but it’s not shielded from the importance of sustainability, not now nor in the future.

It’s an issue for every industry on the planet

2020 was a year like no other. The planet was gripped by the first global pandemic in a century and people’s day-to-day lives were impacted enormously, with billions put into lockdown and huge numbers forced out of work.

However, while coronavirus is the greatest threat many people have experienced to their way of life, the damage it’s caused could pale in comparison to what could come from climate change.

Indeed, in April 2020, even after much of the world had entered into a coronavirus enforced lockdown, Forbes called climate change humanity’s greatest challenge. And it’s with good reason that the world’s most famous business magazine made this claim. If we don’t tackle climate change then millions of people could lose their jobs, be displaced and die. While sustainability alone won’t stop climate change it’s a key part of the answer to the problem. This means it’s not just an issue for the corporate finance industry, it could be the issue.

Some corporate finance companies already think it’s a big deal 

There are various studies, surveys and reports that assess the sustainability of businesses, making it difficult to know which ones to trust.

Without wanting to join the fan club (we’ve already leaned on its expertise), Forbes is perhaps the most relevant resource for seeing which businesses already think sustainability is a big deal.

This is what we found when we checked its 2020 list of the most sustainable companies:

  • Denmark’s businesses are leading the way in sustainability
  • China’s companies aren’t very sustainable right now
  • Sustainability is already a big issue for the corporate finance industry

We can make this last observation because two of the top 10 most sustainable companies are from the corporate industry — ING Groep NV (Netherlands) and Banco do Brasil SA    (Brazil), which are 7th and 9th respectively.

Sustainability is such a key issue for ING that it even gets its own section on the company’s website, with sustainability index products, ING’s stance and the circular economy among the many topics covered.

To put this into context, ING is the world’s 45th biggest corporate finance company. So, if a business this size is taking the issue of sustainability seriously then it’s one the whole industry needs to respect.

Sustainability is something clients expect from corporations

Each industry has its own idiosyncrasies. However, one thing that shares with every industry in the private domain is that it needs to deliver what its consumers demand. One of their key demands is that the companies they invest in promote sustainability.

There are two ways this is an issue the corporate finance industry needs to give credence to.

Firstly, your company must show that it’s committed to sustainability (much like ING in the earlier example we gave). This is a cultural issue that touches upon a huge number of things, such as bonuses, company cars, office equipment and its level of digitization.

Secondly, your company needs to offer sustainable finance opportunities to its customers. This allows them to invest in areas like renewable energy, electric vehicles, education and a range of other areas.

Data on the push for sustainable culture within companies is often skewed towards customers. Namely, that they want commitments to general practices, rather than highlighting specific areas — like X% of people saying they won’t use companies that aren’t paperless.

Stats on customers demanding sustainable investment opportunities are much easier to read. For instance, 32% of people want to make sustainable investments but only 16% actually do so. Part of the reason for this is the number of opportunities available, as there are much fewer sustainable funds than there are unsustainable funds.

This highlights a key issue that there’s an issue between supply and demand. It’s something the corporate industry should look to resolve in 2021. Why? Because the interest in sustainable finance is only increasing and the need to give customers what they want is eternal.

Sustainability is an issue finance execs must take seriously

We’ve highlighted that sustainability is an issue that should be hot on the agenda of the corporate finance industry in 2021. This is because it affects all industries, is already an issue for the big companies in the sector and is what your customers want.

But those aren’t the only reasons it’s an important issue. There’s also the matter of personal responsibility, something that everyone employed in the industry can address.

It’s long been said that if we all just changed our behaviors in one way to be more sustainable. While you may have heard this countless times, it doesn’t stop being true.

Whatever your role in corporate finance, sustainability is an issue that you must take seriously. Why? Because your actions can make a difference to the reputation of your business, the satisfaction of your clients and the health of the planet.

We highlighted two issues earlier in this article that many corporate finance professionals can take responsibility for by adopting a more sustainable approach. These are bonuses and company cars.

For bonuses, you can invest some of this money into sustainable finance projects (in the same way your clients do). You can delegate a portion of your bonus to those areas we mentioned earlier — renewable energy, electric vehicles, education, or any other project that supports sustainability.

Given the negative press coverage corporate finance has received in light of the GameStop investment issue, it’s an opportunity to cast yourself (and by extension) your company in a good light.

For company cars, there are a couple of things you can do. To start with, you can consider if you need one at all, particularly given the widespread moves towards remote working. If it is something you need to retain then you can take inspiration from sustainable finance and request an electric vehicle from your employer.

Given the battering many businesses have experienced because of coronavirus, this is also an opportunity for you to save your company some money, as advisory fuel rates (this relates to the tax paid on company vehicles) is lower for EVs than for any other fuel type. So, you not only take a more sustainable approach to the environment but also to general business operations.

Sustainability is a huge issue in 2021 but this really shouldn’t be anything for any industry, including corporate finance. We’re in a race against time to stop climate change and if this isn’t taken seriously then there will be major repercussions. People will lose their jobs, be displaced and die as a result of this and all of these things shrink the customer base of every single private industry in the world. So, take heed of the lessons outlined in this article and start doing your bit for sustainability today.

Rodney Laws is Editor at Ecommerce Platforms.