What does a sustainable development manager do?

There is a growing recognition that a sustainable approach to financing and investing reduces risk and increases financial benefits – and sustainable development leaders are coming to terms. However, those who boldly take on this role in banks say that they are first and foremost agents of change, and adopting a new way of thinking is paramount.

“A sustainable development manager is an agent of change,” said Francesca Messini, sustainable development manager and partner at consulting firm Deloitte Luxembourg. “Changing attitudes, policies, procedures.” This view was supported by others who played similar roles. “The role of sustainable development is 80% of change management,” said Leticia Jamon, Head of Sustainable Finance at the Luxembourg Stock Exchange, in an interview with Delano in January 2022.

Therefore, CSOs (Chief Executive Officer for Sustainable Development) are expected to manage the sustainable development strategy, act as an agent of change to change thinking and integrate sustainability into the day-to-day operations of the bank. But what does this mean in practice?

Yesterday and today

Historically, the closest relatives of sustainable development managers have been Corporate Social Responsibility (CSR) managers. These functions were generally close to corporate communication and provided responsible investments in non-governmental organizations, mostly environmental.

According to Francesca Messini, the sustainable development manager is different. “Environmental and social management is now part of the organization’s DNA. CSO is the glue that binds it all together. ”

According to a joint report by the European Banking Federation (EBF) and Deloitte, published on 14 June, 80% of the 28 European banks surveyed have sustainable development managers. These managers generally strengthen the bank’s internal capacity for stability. Therefore, they define the strategy, prepare staff for its implementation and increase the level of stability of the bank itself.

According to Francesca Messini, banks are the only ones who can support companies that have firm transition plans. This is due to two factors: external, for example, banking rules and shareholder demand; and internal: pressure on the bank to manage sustainability risk, increase the impact of sustainability on business decisions, efficiency and competitiveness, and integrate this into management, governance and business strategy.

And although the role of CSOs barely existed five years ago, it has evolved. He no longer focuses on “G” governance, but on “E” and “S” environmental and social issues, says Francesca Messini.

She gives some practical examples. “When it comes to environmental impact, you need to look at the bank’s loan portfolio and check the proper analysis of underlying assets. As for the bank itself, you are considering the impact of the bank’s building on the environment, its business travel planning, its fleet. “

Social impact targeting works in a similar way. “Again, look at loans and see that they give certain communities and certain demographics access to finance. This may include applying different criteria than before. “

Until now, many sustainable development managers in banks have focused on the environment, not society. According to a joint EBF and Deloitte report, 79% of banks surveyed decided to focus their sustainable development strategy on sustainable climate change, compared with only 7% on social goals such as hunger or drinking water and sanitation (11%).

This can be partly explained by the fact that climate action affects other UN Sustainable Development Goals (CSDs), the report said. Or that almost 50% of banks’ risks in the euro area are directly or indirectly related to climate change.

However, Francesca Messini believes that this will also change. “I think there will be a shift towards more public attention.” According to a report by the EBF and Deloitte, historical problems of social impact are related to the lack of indicators, more complex things to track and measure and less reliable market data.

With the first EU social taxonomy project and the new EU regulation on due diligence, a structure emerges. “Social impact can be explored in the company’s supply chain – human rights, working conditions – as well as the impact on the environment.”

Resources and talents

One of the biggest challenges facing CSOs is building a team around them. The novelty of stability in banking means that most candidates simply have no experience. In fact, less than 20% of EBF and Deloitte respondents have held a similar position in the past.

This observation does not surprise Francesca Messini. “Resources and talent are a challenge. The combination of financial and scientific experience is not related to standard financial profiles. ” Therefore, many banking organizations create a team that combines these skills and then invest in the development of new team members.

The survey showed that 72% of sustainable development leaders come from the business department of their organization or have professional experience in business. Previous positions include Business Development Manager, CEO or Export Finance Manager.

A study by EBF and Deloitte states that this is not a problem in itself, as it shows that banks are approaching resilience from a business perspective.

However, Francesca Messini believes that academic and professional experience will grow – starting with diploma courses. “Really positive market trend over the last four or five years – students studying sustainable finance. This is happening even at the University of Luxembourg. ” In 2019, the University of Luxembourg established a project of sustainable financing within its finance department. “When these graduates come to the banks, we will see more experience.”

Respondents stressed the need to have more research profiles in their team on topics such as biodiversity, water management or renewables. Respondents also stressed the need for staff trained in the social aspects of the ESG, such as human rights and working conditions.

From risk to opportunity

Sustainability shifts from risk to the ability to expand products into existing markets or capture new ones. The generation of millennials is a market that is covered in a survey that puts values ​​at the heart of decision-making. How can CSOs maximize these opportunities?

“Access to the CEO is fundamental. It has to go from above. The CEO sets the tone, ”says Francesca Messini. She predicts that the transition from risk and compliance with business strategy requirements will lead to CSOs increasingly becoming part of the team of leaders, along with the CFO and CEO. “It’s going to get more popular with more decision-making power,” she said.

According to her, increasing regulatory complexity due to the fragmentation of the European market means that CSOs will also become a point of interaction and dialogue with the authorities. This also applies to the lack of reliable ESG data. Respondents to the EBF and Deloitte called for high-quality ESG data and reporting in Europe. As the role of CSOs grows, so does their influence and lobbying power for a universal approach to data.

But Francesca Messini’s view of the long-term role of CSOs is surprising. “In the long run, that role may disappear altogether,” she said.

“There have already been respondents who said they do not have CSOs, as sustainability is already in place at all levels of their organization.” Although the lack of a need for CSOs can be considered a successful implementation of the ESG, Francesca Messini believes that this will be rare in the short and medium term.

“These respondents were banks that were created for sustainable development, so it makes sense not to have only one person as a CSO. However, for existing banks, the role of CSOs is needed to facilitate this integration. “

For Francesca Messini, who came to the role of sustainable development manager after working in consulting, what is the most valuable skill she has? “Talks. This is the most important skill. ” An indicator, like any other, that there is still a lot of work to be done to integrate ESG into the company.

This article was written for
Done, translated and edited for Paperjam.

This article is taken from the bulletin Paperjam + Delano Finance, a weekly meeting to follow financial news in Luxembourg.
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