HRD’s pocket guide Personal development
HRD’s pocket guide to...
sustainable finance
Why do I need to know
about it?
Last month UK MPs passed a motion
to declare an ‘environment and climate
emergency’ in response to mass protests
held by activist group Extinction
Rebellion. This followed an estimated
1.4 million young people around the
globe going on ‘strike’ from school to
draw attention to environmental
issues, while national treasure David
Attenborough frequently warns that
we’re fast approaching the point of no
return for the planet.
“To be successful businesses need to
be aware of the changing nature of the
environment they operate in. They will
need to demonstrate to their lenders,
investors and shareholders that their
business model is sustainable in the
long term,” says Nina Seega, research
director for sustainable finance at the
University of Cambridge Institute for
Sustainability Leadership.
Cue growing interest in sustainable
finance, which rather than focusing
on purely economic markers of
performance considers environmental,
social and governance (ESG) factors
as well.
“There are numerous social and
environmental problems and
challenges that could benefit from
sustainable finance. Investors are
increasingly not just asking questions
of business about what they are doing
around ESG risks but about what
impact their investments are making,”
explains Rishi Madlani, sustainable
finance lead at Royal Bank of Scotland.
What do I need to know?
Although most would agree that
operating sustainably is a good thing,
how to measure whether investments
and assets are sustainable is tricky. A
common example is ‘ESG integration’,
where investors or shareholders will
take ESG factors as well as financial
ones into consideration before
finance and sustainability more
broadly is new, so additional training
may be required,” Seega says,
adding: “With their
understanding of the
importance of wellbeing, HR
directors can add tremendous
value within the social dimension
of sustainable finance.
“Motivating existing employees as
well as recruiting new ones may be
easier in an organisation that is
aligned with sustainability.”
Havard-Williams agrees that
operating sustainably can resonate
with prospective employees,
particularly Millennials, adding that
this will hopefully go some way to
mitigating the fact that “there will be
a significant skills shortage in this
area, particularly on the financial
services side”.
She adds the importance of HR
facilitating cross-department
working:.“To engage in relation to
these issues typically requires multidisciplinary
working and silos can
pose a problem. The functions that are
likely to need to work together on ESG
factors include finance, sustainability,
legal and risk, investor relations and
HR,” she says.
Anything else?
Sustainable finance is not merely the
latest greenwashing trend, and there is
real appetite both outside and within
the financial sector for change.
“What’s really surprised us in recent
months is the number of staff who are
volunteering to work on the sustainable
finance agenda. A recent call to our
associate and analyst pool resulted in
23 volunteers coming forward,” shares
Madlani. “In the near future the
majority of finance will need to be
sustainable and there will be increasing
demands to consider broader impacts,
so this is an opportunity to be ahead
of the curve.” HR
Going
further
hrmagazine.co.uk June 2019 HR 51
Illustration: AdobeStock
The HRD’s pocket guide series offers an explanation of areas outside day-to-day
HR that business-savvy HRDs need to have a handle on. By THIRZA TOOES
deciding to invest/approve a business
decision. The Global Sustainable
Investment Alliance defines seven
distinct strategies for doing this.
There are also a growing
number of sustainable financial
products like green, social and
sustainable bonds. “Products
such as these help shine a light
on the environmental
problems and social impacts
of assets,” says Madlani. “The
impact, has grown significantly
since the first green bond issuance in
2007. The market saw more than $160
billion in issuance in 2018. The social
and sustainability bonds markets were
worth approximately $60 billion in
issuance in 2018.”
“The Loan Markets Association
recently issued new principles around
sustainability-linked loan products,”
he adds.
Businesses should prepare now to
ensure they can answer the questions
being asked of them by shareholders,
and increasingly governments and
consumers too.
Vanessa Havard-Williams, partner
and global head of environment at
Linklaters, explains that new
regulation and guidance is being
developed that will ask for greater
disclosure from pension funds, banks,
insurers and other financial services.
Corporates may also need to report
their sustainability efforts in greater
detail if the EU passes new laws.
“The change in the level of
sophistication of incoming reporting
requirements and expectations is not
yet appreciated. There is a significant
learning curve,” she highlights.
Where can HR add value?
To stay ahead of this learning curve
HR will need to focus L&D efforts
here. “For many businesses sustainable
Recommended
reading:
Principles of
Sustainable
Finance
by Dirk
Schoenmaker and
Willem Schramade
Finance, Society
and Sustainability
by Nick Silver
Prosperity without
Growth
by Tim Jackson
green bond market, which
focuses on environmental
/hrmagazine.co.uk