Financiers are the new corporate sustainability activists, new research from Addleshaw Goddard reveals

Source: press release, 22 April 2021

Addleshaw Goddard Partner, Amanda Gray
Addleshaw Goddard Partner, Amanda Gray (photo: Addleshaw Goddard)

A major new European research study reveals that the financial community is driving action on sustainability, with 92% of business leaders saying that banks have been significant in influencing their business to act more sustainably.

The study, commissioned by leading international law firm Addleshaw Goddard, is based on the views of 1,000 business and finance leaders. It reveals that banks are currently the most significant influencer of corporate sustainability, named as a driver by over nine in 10 business leaders. The next most important influencer is governments (87%), followed by investors and insurers (both 86%).

Amanda Gray, Partner, Addleshaw Goddard says, “These findings reveal that financiers are emerging as unlikely activists, putting sustainability at the heart of their strategies. Businesses need to be aware that their approach to sustainability will increasingly influence their access to funding, and that the threat of the funding tap being turned off is not in the distant future – for some it will occur within the next 4 years. To ensure future success, boards must now ensure that sustainability is a strategic priority.”

The research reveals that almost three-quarters (74%) of lenders, investors and insurers believe that a business’s sustainability strategy is a key indicator of its future profitability. Further, almost two-thirds (65%) of the finance community say they already always formally assess organisations on ESG or sustainability criteria. Eighty-four percent of finance providers say they won’t offer services to companies that lack a clear net-zero strategy and 100% of the finance community plan to turn off the funding tap in at least two sectors within the next 4 years to businesses that lack a transition strategy.

Responding to the research, Nigel Topping, the UK Government’s High Level Climate Action Champion, says, “Climate change is the greatest risk of the 21st century, and boardrooms must equip themselves to handle it effectively. As this study indicates, companies that are ahead of the curve can mitigate transition risks and capitalise on business opportunities. It is up to forward-looking organisations to take their place as leaders of the transition to a decarbonised economy. Those that do so will be in a much better position to compete for customers and funding as society becomes ever more climate-conscious.”

The research also shows that although banks are exerting the most pressure, it is investors that are currently asking for the most evidence. Almost all businesses (99%) have been asked by investors to provide evidence of their sustainability performance over the last 12 months, while almost half (47%) have been asked for evidence by banks, and a fifth (19%) have been asked by insurers.

However, it is clear that there is a disconnect between what the financial community wants and what businesses are currently providing. While 86% of finance providers say that the sustainability strategy communicated by a company’s CEO is critically important to access their services, only 7% of businesses proactively communicate their strategy externally.