ESG Strategies Increasingly Critical to Success

ESG spending is increasingly vital for all tech-focused companies – as well as financial services in general. Beyond the obvious benefits, as younger generations increasingly dominate the workforce, it’s becoming a clear and present necessity for attracting talented candidates to your business.

That can take a lot of shapes for individual companies, but the focus as a broad theme continues to crystallize.  JP Morgan picked up an ESG investing platform. Climate risk-focused startup Climate X raised $1.5 million in pre-seed funding. And there’s real profit to be made – a recent Morningstar study showed that the average annual return for ESG funds with large global company investment has been around 6.9% annually, compared with 6.3% for other fund.

But how should companies that aren’t solely focused on a purpose-driven initiative – like many established banks – approach taking a more pro-ESG mindset?

“You’re then looking at the concept of what sustainability means to an organization, and how that’s going to flow back to employment,” said Nick Dean, MD at Adlib Recruitment, in an interview with Fintech Futures.  “From the outset, you have a number of considerations.  Some people will go directly for impact, while others will look at the credentials of the business.”

It requires companies to think about something beyond simply the bottom line – specifically, how best to balance sustainability and other societally useful services and products against profitability. These two can, however, especially when taking a longer view, work hand in hand.

“There’s plenty of research that says the more purposeful you are, the more profit you will make,” Dean said. “If you build employee engagement, a stronger team, and a better output, it will result in a better profitability.”

And building that kind of engagement is critical if you have any hope of attracting the best talent.  Some research suggests that more sustainable firms can actually sustain higher margins on the customer end, and moreover, that employees who feel they’re working towards these kinds of goals that have personal importance to them are often willing to accept lower wages for higher producitivty.

But you have to be prepared to fully commit.

“The way that I talk about it a lot is authenticity,” Dean said. “Authenticity from the leadership. it’s very easy to hire a people team and a comms team and get them to figure it all out and put it through the company, but if the authenticity isn’t within the leadership team, then it will fall down quickly. It won’t be consistent, and it won’t be that message.

“If they’re making decisions purely on the bottom line, in a short-term view, that’s when those policies don’t come through. Those policies come through when there’s a long-term view. Each employee is a contribution to that long-term view – feeling good, being good, all of those things.