ESG hasn’t always been a Boardroom issue, and while there is a world-wide recognition that ESG is important, the levels of uptake and commitment vary across the regions. Having a global perspective though can be a valuable insight, identifying best practice from leading areas and sharing with others helps to continually raise the bar.
We spoke with Jessica Robinson, MENA Sustainable Finance Leader at EY-Parthenon about the ESG journey, the impact and opportunities for businesses and who the key facilitators for change will be. Jessica’s background is as a management consultant in the financial services sector who decided to specialise in sustainable finance and ESG after returning to university to study for a second Masters degree, this time in Applied Environmental Economics. Since then, Jessica has been a global voice on ESG and sustainable finance, working closely with clients in the financial industry on developing their ESG and net zero strategies.
Is ESG a Boardroom issue?
Definitely! When I first started working in the ESG arena 16 years ago no one talked about it, in fact ESG wasn’t even a term. At the time, I was working in Asia and the environmental degradation was very apparent; I had been working in the mainstream financial services industry as a management consultant, but I became convinced that the industry was completely unaware of what impact it was having as well as the massive the role it must play in dealing with the environmental and climate change challenge that was becoming increasingly obvious at that time. It was a huge wake up moment for me – I wanted to be part of the solution, not part of the problem.
I focus on ESG, sustainable finance and responsible investing, and have advised organisations ranging from institutional investors, financial institutions, and corporates on a broad range of issues relating to green finance, sustainability and ESG investment. I see Executive teams recognising the importance of ESG, and that’s a really important shift. When I first started working in this field no-one really understood the whole concept of why ESG is a business issue, now it’s definitely different – everyone sees it as a hot topic that they need to be involved with. It’s about risk and opportunity, but also about the social license to operate.
What is ESG?
One of the challenges the financial industry continues to face is the lack of coherent understanding and widely-accepted definition of what ESG is and what this fundamentally means to a business. The good news is that regulators are really starting to grapple with this challenge and initiatives such as the involvement of the CFA in providing ESG training to its professionals is helping to raise its profile as well as practical application. However, the challenge we continue to face is that some people still view ESG as a ‘nice-to-have’, or even worse, align it to the PR and marketing teams and agendas. This is reflective of a misunderstanding of how strategic ESG is – and how companies and financial institutions need to prioritise ESG as a strategic imperative.
For ESG to make the impact it needs to have on the real economy – as well as driving solutions to time-critical global challenges like climate change – we need corporate leadership to assign the right level of importance and commitment. In particular, for ESG to be prioritised, many companies should consider creating a function in its own right, so that ESG risks and opportunities sit at the centre of making corporate decisions. Underpinning this needs to be sufficient accountabilities and responsibilities, as well as internal reporting and KPIs, to really ensure ESG is being integrated effectively.
In my role at EY-Parthenon I support clients in the MENA region along their ESG journey. Within the financial services sector, I quite often see that financial institutions are still unsure on where to start. Our role is to guide them through this process, to identify the strategic ambition and then translate this into their commercial objectives as well as practical implementation. Part of this is helping the client to articulate what ESG means for the company in terms of business model and decision making, as well as products and services. For example, when working with institutional investors will are looking both at how to integrate ESG into the investment-decision making process, but also how investment funds can make ESG priorities part of their fund strategies and focus. For banks, ESG can be a lever for product innovation – take the commercial banking business, looking at offerings like sustainability-linked loans and green bonds; for retail, products like green mortgages or green credit card services. ESG in financial services is not about compliance – it is about understanding the ESG landscape and the rapidly changing dynamics of the work in which we live, then determining how businesses respond.
Geo differences
Although I’m originally British, I have spent my adult life overseas. Moving from London, I then worked in New York before moving to Asia. After a long stint moving around Asia, five years ago I moved to the Middle East. I believe my global experience gives me a really valuable global perspective on ESG.
From an ESG regulatory perspective, Europe has made the progression much more quickly than other regions in the world. Their approach, standards and regulatory expectations are much more sophisticated. That said, while Asia did lag initially, it has certainly been catching up with Europe, particularly on climate risks and issues. It has been really interesting to watch developments in the Middle East – five years ago there was little understanding of ESG but the last 12 month or so has seen this really shift.
Globally, much of the driving force for change in the financial industry has come from the central banks and regulators; as well as introduction of guidance such as from the Task Force on Climate-Related Financial Disclosures (TCFD) back in 2015 driven by the Financial Stability Board (FSB). This impetus has been important and is starting to have an effect in the Middle East. But I also think in MENA one of the key driving factors now is the focus governments are giving to being leaders in the low carbon transition. With COP27 and COP28 being held in the region, this is only going to accelerate.
Recruitment challenge
As financial institutions look to build impactful ESG strategies, along with the internal infrastructure that sits behind these strategies such as KPI and target setting as well as reporting, these are big projects that require dynamic shifts in corporate thinking. I am often asked by clients to help develop and implement ESG frameworks. I think one of the biggest challenges facing companies is that recruiting a strong ESG team can be difficult – unfortunately, there is a real skills shortage of ESG professionals with solid experience and expertise. I often see individuals re-spraying themselves as ‘green’ or ‘ESG experts’ but if you dig deep, their experience in ESG is very limited and they do not necessarily bring the insights and expertise needed for ESG transformation and strategy projects.
I am often a guest speaker at universities and on MBA courses where I talk specifically around ESG, sustainable finance and financial services. This is an area where younger people clearly want to be involved – they see their careers aligned with sustainability and want to be part of its growth. However, we need to be able to engage with talent to train them effectively so they can find fulfilling and impactful careers.
Is ESG only for large organisations?
As well as large corporates, on a personal level I also mentor start-ups and sit on several advisory boards and committees of organisations who want to accelerate ESG and sustainability more broadly. The benefit of considering ESG for a start-up is that it ensures you are managing your risks better and it can often positively contribute to raising funds from investors. Whether early-stage seed funding or later stage VC / PE investment, financiers are looking for well-run companies, and this means companies that understand ESG risk and manage them well.
When it comes down to it, we all need to be adopting ESG. Climate change is happening today and in line with the commitments made under the Paris Agreement in 2016 corporate and investor action is urgently needed. Forward-looking companies understand what this means for their business and are looking to adapt their business plans accordingly. Adopting alternative energies has the benefit of contributing to Net Zero and in many cases makes sense financially, against the backdrop of rising energy prices from traditional sources, as well as allowing companies to future-proof energy supply.
Where will change come from?
I fundamentally believe that women are and will be the drivers of change when it comes to ESG, sustainability and climate. This is the main reason behind my book – Financial Feminism - and blog Moxie Future - focused on engaging with women as sustainable investors. Some years ago I was struck by the number of professional women that would approach me wanting to learn more about ESG – not only in terms of their own career trajectory, but also how they could apply it on a personal level – in particular, to their own investment decisions. I undertook some research and found that over 80 per cent of women surveyed care about where their money is invested, 69 per cent feel a sense of urgency to invest responsibly, and 63 per cent are motivated to be responsible investors.
Over the years I have also done a lot of mentoring of female professionals, for example through Asia’s Women’s Foundation, as well as being involved with female-focused platforms such as FutureWomenX. Through these avenues, and through my broader professional network, I really do see how engaged women are in ESG and sustainability – professional and personally. This just reiterates the call for more diversity, more diverse voices at the table and as decision makers. For corporate leadership, this isn’t just about hitting the numbers and diversity quotes – it is a huge opportunity to harness a phenomenal force for change.
