Taxonomies of courage: ESG metrics and what then?

Written by Leda Glyptis
16th May 2024

ESG is the topic right now, isn’t it?

Knowing what the answer is, it turns out, is immaterial until you are prepared to do something about it

Some people genuinely, passionately believe in it. Some are just going through the motions, doing the absolute minimum because they have to for regulatory reasons and market optics. Others just talk and hope we won’t notice that that is all they intend to do.

We notice, by the way.

We notice that there is a lot of talk. We notice who is saying what. And we notice who is doing what.

And of course talking about things is important because it puts them on the agenda. It is a start, and not talking about things is actually worse.

And keeping the conversation going helps things stay on our radar. I am not against the talking part. I think it is valuable even if it gets noisy at times. When trying to tackle big, complicated topics that touch on everything we do across our economies and lives, the multilateral, multi-faceted, ongoing dialogue is important.

You need the global players at the table. They are the ones who can have the most impact, so without them, we are nowhere.

You need the policy angle.

You need government and regulatory players at the table.

You need to hear the intent and the activity being undertaken. You need to discuss the regulatory frameworks. Understand the taxonomies, the timelines, the expectations. It is helpful to share work undertaken. Challenges faced and overcome. It is helpful to share the thinking and the ambition. Baby steps and grand dreams.

And look.

Sometimes we talk about things as we work through them. I firmly believe that.

I remember doing industry panels around what an API was and why it wasn’t the end of the world as we know it.

This was on the main stage at huge events, standing room only. Over a sustained period of time.

It’s funny to even say that now.

It’s hard to remember a time when this was new and scary to the banking industry.

But in a very recent past, it was new technology for banks and there were technical as well as risk and compliance fears to be overcome. Things to be understood before they could be built. So talking about this new thing while it was scary was part of how it became less scary. That and actually doing things. Talk and activity is how an API-first architecture became part of the furniture now.

That said…

I was also there as we started talking about innovation… and I am here while we still talk about it like it’s an abstract thing that can be achieved through a Reverse Voldermort (whereby it materialises if you keep saying its name). With action remaining patchy and inconsistent still and aspiration ranging from the lofty to the barely there.

I sincerely hope ESG will be the former, not the latter.

But I had a moment’s pause, and not a good one, while listening to an ESG panel a few days back. One of the biggest asset managers on the planet was saying that they now have a full and granular view of their carbon footprint as a business (in terms of their own operations) and across their portfolio.

That is a yay moment.

That is big, because without information, where do you even begin fixing things?

So here he is saying we have the information.

And then he went on to say that when you do that work… you quickly realise that a handful of clients, no more than five or six, represent about 80 to 90% of your entire footprint. That is another yay moment. Or is it?

If you undertake the fiddly and costly work of assessing your footprint… if you go through the effort… this is the kind of find you want to have: stark.

There is a big arrow and flashing lights showing you which way to go to start addressing this.

There is leverage because if five or six clients have 80 to 90% impact then these are sizeable relationships that matter, and relationships that matter provide their own context for ongoing engagement. You can have a conversation, any conversation, when you have a relationship that matters.

It also means that you have the option for a concentrated, demonstrable ta-da! No need for the bitty work of having to make a million small adjustments to eventually add up to material change. You can play in the big leagues.

You can.

But will you?

Because depending on who those clients are… or where they are… which jurisdiction they call home and how much their regulators care about this all… what means, tools and mechanisms do they use for measuring impact and do their numbers, perceptions, obligations and appetite tally with yours or will you have to convince them as to the size of the footprint? Or the significance of the cause?

Your concentration is the answer to the unspoken question. And it may also be where the discussion dies.

In Greece, we say, “Bigger boats bring bigger storms at sea.” Don’t ask me how that works. You’d have thought that a bigger boat would help you navigate the storms.

You’d think concentrated risk would focus the mind.

You’d think that if you do all the work to calculate your footprint and find that 90% of it is in one place… or 5… but not 105… the action plan writes itself.

You’d think.

When you set out to measure things, you hope for stark, self-explanatory findings. You hope for numbers that speak for themselves. You hope for an obvious answer.

It is a rare bit of luck to get what you hoped for. To get data that screams the solution at you.

Facts such as these.

What to do next was always going to be a conversation around conviction, materiality, profit and leadership. Knowing what the answer is, it turns out, is immaterial until you are prepared to do something about it.

It always comes down to that, after all.

#LedaWrites

Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.