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Imagine if business was driven by ESG

I’ve written so much that you would think there was nothing more to write. But there always is. One thing about all I’ve written that is consistent is leadership. What seems to be annoying me the most is a lack of leadership or, rather, a lack of the right leadership.

Usually my conversation about leadership is focused upon digital transformation, and the fact that a bank cannot transform to be digital-first if it has no digital people in the leadership team. But my new focus, alongside digital, is environmental. Are there any ESG (Environmental, Sustainable, Corporate Governance) people on the Board and leadership team?

Apparently not.

I was a little taken aback when I read a recent NYU Stern report, for example, about the knowledge in the leadership of corporations of ESG issues. Maybe you won’t be surprised if I tell you it’s almost zero. The study by NYU Stern looked at 1,188 board members of the Fortune 100 compoanies. How many of them have any ESG credentials? What do you think?

According to the study, in the “E” category where climate and water are two areas of material importance to most companies and investors, across all 1,188 Fortune 100 board members studied, a total of just five had relevant experience.

The health care, financials, and insurance sectors have material “E” risk (most notably, climate change) yet only 11 members of 149 in the sector study group had “E” credentials.

The “S” category has the highest concentration of ESG board expertise at 5% of the 1,188 board members studied. Most of that 5% is dedicated to supporting an increase in the number and influence of women in the executive and board suites.

In the “G” category, just eight board members of the 1,188 studied had expertise in cyber/telecom security, an area where the material financial risk is increasingly apparent, and very few directors had authoritative experience with ethics, transparency, corruption, and other material “G” issues.

I could go on but recommend you read the report.

What it drilled home for me is that, like digital transformation, if you have a board and leadership team with no idea, then you have a company with no idea. In fact, my strapline of the moment is that if your company doesn’t stand for something, it falls down. What does your company stand for? What do you stand for? What is our purpose?

If a company is led by people with no purpose but to deliver profit, is that a good purpose? If a company is led by people who have no idea how to change the company, is that company going to last? If a company has zero interest in ESG, will customers still buy from that company?

My belief is that (a) a company has to have digital leadership to change the firm to a business model born for the internet; and (b) the company must be committed to do good for society and for the planet (ESG), not just good for the shareholder (ROI).

It’s about stakeholder capitalism, no longer about shareholder capitalism.

OK, I’m naive but just imagine …

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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