Data taken from a sustainable finance poll of senior management from across 32 financial services (FS) firms with business interests and/or presence in the UK market in October 2020. Participants included 20 banks responsible for £15.49tn in assets, 8 insurers with AUM of £1,348bn and 4 asset management firms representing a combined AUM of £1.08tn.
- Regulatory requirement continues to be the key driver for firms’ focus on climate risk (69% of respondents), but Boardroom and investor pressure is present
- No respondent believed COVID-19 is driving increased focus on climate risk
- Almost three quarters of respondents (72%) claimed that unless they adapt their business imminently, climate change will likely have a long-term negative impact, and 49% said they expect to change their climate change risk strategy substantially
- Only 8% do not believe their firm is exposed to any short or long-term risk from climate change
- Over half of respondents (55%) said that their business is currently exposed to transitional risks as the world migrates to a low carbon economy
- The response to the deferred timelines of the 2021 biennial exploratory scenario (BES) and COP26 are widely regarded as positive by senior FS executives, with 92% of respondents welcoming the additional time, and only 8% claiming they have made good progress
Gill Lofts, EMEIA Sustainable Finance Leader at EY, comments:
“Climate change continues to sit high on the political, social and investor agenda and firms recognise there are real risks connected to ESG apathy. There is a lot of activity happening in the market, which is to be commended, and given the scale and scope of compliance, it is unsurprising that it is mainly driven by regulatory requirement. But to truly shift the dial on lasting change that sees climate risks to business reduce, firms must continue to go beyond the regulatory baseline, and complement this activity with their own strategic goals and visions for the future. Sustainable finance requires whole business transformation, not just regulatory compliance.
“COVID-19 forced firms to drop what they were doing and respond to unprecedented challenges, but if the pandemic has taught us anything, it is that ESG-aligned strategies aid strong, long-term financial performance. As we look to economic recovery, it will be crucial that sustainability sits at the top of the agenda and drives transformative change.”