Connect the Dots: Big Banks, Stakeholder Sentiment, and ESG Impact

1 week ago

Not sure if environmental, social, governance (ESG) impact and stakeholder sentiment are connected to your business operations and overall bottom line? What about access to capital? Through the establishment and enforcement of sustainability policies, many large financial institutions are drawing the line when it comes to their clients’ approach to positive impact.

Let’s take HSBC as an example. You needn’t be a finance expert to understand its Sustainability Risk expectations:

“HSBC seeks to ensure that the financial services we provide to our customers to support economic development do not result in an unacceptable impact on people or the environment… We end banking relationships with customers when they are unwilling or unable to comply with our standards.”1

And we are seeing action. Recently, HSBC triggered an investigation by the Roundtable on Sustainable Palm following allegations that a company was preparing to clear large swaths of rainforest for oil palm cultivation.2

As is to be expected, the focus on sustainability is not limited to high profile topics such as oil palm. In addition to agricultural commodities, HSBC has several Sustainability Risk policies that provide further detail for a range of sectors, including chemicals, defense equipment, forestry, etc. And HSBC is not the only financial institution with sustainability on its radar in a meaningful and actionable way. BNP Paribas, Deutsche Bank, and others, are taking a deep and detailed look at their sustainability policies and their implementation.

What does this mean for companies? What is the actionable takeaway? At least two points are clear:

  1. Understanding and addressing stakeholder sentiment—and proactively so—is critical to sustaining relationships with financial institutions.
  2. Positive ESG impacts are criteria by which financial investments are evaluated.

Companies that choose to be out of touch with regional, supply chain, and even global stakeholder sentiment, are thereby choosing to increase the size and scale of their financial risks by jeopardizing relationships with large lenders. Business operational constraints and investment analyses that fail to incorporate and assign value to positive impact leave the bottom-line benefit of shared value on the table and diminish corporate and project competitiveness in securing key investment partners.

The solution is clear: stakeholder sentiment and positive ESG impact are no longer a value-add or components of aspirational sustainability goals. Building and maintaining strong relationships with financial partners who are critical to corporate success requires ongoing, effective stakeholder engagement and an integrated, comprehensive investment portfolio that values achieving both positive ESG and Return on Investment (ROI). In short, not only do the “dots” connect, they form your bottom line.

1 http://www.hsbc.com/our-approach/sustainability/finance

2https://www.theguardian.com/sustainable-business/2017/jul/17/hsbc-investigation-palm-oil-company-deforestation-allegations-noble-plantations