CEOs on the Risks of NOT Taking Climate Action

Thursday 17th November 2022

The 2022 Annual Summit convened financial services CEOs in London to share their approaches to leading purpose-driven organizations. Panel moderator Paul Jenkins, a senior partner at McKinsey & Company, began by addressing the benefits of integrating purpose into company DNA, beyond hitting ESG targets: “Businesses that embed purpose grow faster, have lower cost, have less risk and have four times more employee engagement,” he said.

Each of the CEOs brought a unique perspective, but a few hallmarks of a strong purpose-driven strategy stood out:

  1. Having a clear—and clearly communicated—narrative on purpose
  2. Engaging employees across levels and functions to understand how the company champions purpose and the business benefits it drives
  3. Choosing clear goals to work towards
  4. Making bold stands and taking actions that move the sector

None of this is easy. As NatWest CEO Alison Rose shared, integrating purpose requires balancing short-term commercial objectives with long-term vision. “Purpose is about ensuring the returns to our stakeholders over the long term. But that requires talking to our shareholders about the trade-offs we are making in the short term,” she said.

Leaders also face a balancing act when meeting different ESG goals. For example, Rose noted that climate-concerned consumers have called for the bank to stop investing in oil and gas. Yet this would mean cutting lending to poor farming communities that cannot afford to retrofit energy consumption—which contradicts the bank’s commitment to inclusive banking. The challenge is to be an “and” organization: keeping the short- and long-term, ESG goals X and Y, in mind.

For all the speakers, investing in women-led SMEs presents a substantial “and” opportunity—to support consumer needs and broader economic goals, differentiate the brand and expand revenue streams. “We know there is a $260B revenue opportunity if we close the gender gap in entrepreneurship in the UK. So, this has very practical commercial benefits,” said Rose.

Nadia Al Saeed noted that Bank al Etihad’s holistic customer value proposition for women-led/owned businesses is “very much aligned with the country’s priorities. We see gender and SMEs as the future of Jordan, and we’re delivering on those.”

When it comes to the “and” between gender and climate, nowhere do the two better intersect than in supporting female entrepreneurs to start and scale green companies. This opportunity took us to the UK Parliament on Day 2 of the Summit, where NatWest’s Mark Parsons shared that 53 percent of entrepreneurs at NatWest’s 14 business incubators are female. While this is a remarkable statistic in and of itself, Parsons reported that in their green tech incubator, the proportion is 57-percent female.

However, there are barriers to making green entrepreneurship fully inclusive. Parsons noted that male-run green businesses tend to be in the engineering, energy and transport spaces; while women-run green enterprises tend to be B2C, product-led ventures. “Lots of these businesses are formed by men who have worked 30 to 40 years as engineers and now want to do something new,” he said.

Emma Kisby, who founded personalized carbon footprint tracker CoGo, agreed that the talent pipeline is an issue. “CoGo has a lot of women in our HR and customer-focused roles, but finding female engineers was much harder. We have had to pay more for female engineers because we wanted their points of view within that division, and ended up with a positive gender pay gap—women, on average, get paid more than men in our company.”

Panelists agreed that if there is one policy prescription, it is to encourage more girls to study STEM subjects, as well as to teach entrepreneurship in schools and position it as a valid career choice.

The intersection of climate and gender was also a theme from speakers on the Hardwiring Climate Action panel at the Summit. Some members, including AXA and NatWest, have put climate action and women-centered strategies under the same umbrella within the organization. Ulrike Decoene from AXA shared that they believe “the initiatives for women will work for all ESG categories.” Julie Baker from NatWest discussed the tactical similarities when implementing the two; building and communicating the business case, developing the CVP, training staff and establishing KPIs and scorecards.

Ann Cairns of Mastercard shared that, “Women investors are twice as likely as men to want to invest in companies with strong ESG policies…and when they buy products, they are more likely to ask, ‘is this sustainable?’”

Cairns gave examples of how Mastercard enables customers to make purposeful choices around consumption, by providing trackers that enable consumers to measure their carbon footprint based on purchases, switching out air miles points for planting trees and replacing plastic cards with payments apps.

Driving gender inclusion and climate progress will require unprecedented levels of internal coordination and external collaboration. But for leaders today, transformation to a zero-carbon economy is imperative. As ABN AMRO CEO Robert Swaak said, the risk of maintaining business-as-usual is too high to ignore. “Transformation is painful. But the risk of not changing is far worse,” he said.

The CEOs also spoke of the competitive advantages of leading with purpose. As Al Saeed said, “The trick is to have it within the DNA, within the culture. People feel it, the clients feel it. This cannot be replicated easily.”

Alliance members walk the talk on gender and are well-positioned to carry that forward into climate action in ways that continue to support women and the bottom line. To help accelerate that work, the Alliance will launch our first-ever Working Group on Climate Action, with 8 monthly sessions starting early next year. Stay tuned!