This post first appeared on Risk.net. Read the original article.
Risk and resilience continue to play an important role in the navigation of an increasingly uncertain world. Fusion Risk Management explores why it is equally crucial for technology to support organisations in addressing pertinent environmental, social and governance (ESG) issues
Businesses today are facing greater unpredictability and becoming more vulnerable to emerging risks relating to ESG issues. Most recently, the global impact of the Covid‑19 pandemic has thrown such topics into sharp relief, encouraging consumers, investors and shareholders to prioritise concerns such as climate change, transparency, equality and ethical living.
The pressure on financial services firms to integrate ESG issues into systems, processes and overall decision-making is growing on all sides. Shareholders, investors and pension funds are all starting to make their voices heard on the link between corporate attention to ESG matters and business sustainability and resilience.
Consumers are also increasingly prioritising these concerns. Nearly half (44%) of banking customers across Europe see ESG issues as an “especially important” factor when choosing a bank or financial services provider, according to a May 2021 survey of 6,500 European banking customers by consultancy Kearney. One in four of those surveyed said they would switch institutions if they felt their bank was not engaged in these issues.
Furthermore, research by the Global Alliance on Banking Values shows banks that perform well on material ESG issues – for example, data security and customer privacy, and systemic risk management – outperform others lacking in these areas.
Most organisations already recognise the need to respond to these concerns. In fact, it is becoming increasingly clear to business leaders that a strong focus on ESG not only drives more sustainable, fair and community-minded enterprises, but is also good for the bottom line. As such attitudes permeate the business world, organisations are looking within to find teams and develop strategies that can help integrate this attitude into decision-making systems and processes.
Recent research reveals risk management teams are often charged with monitoring and managing such risks. According to a September 2021 poll of 250 attendees at a Fusion webinar, risk, resilience and compliance functions were tapped to lead these efforts at 65% of organisations. However, 61% of these have not yet started or are only starting to explore ESG issues.
For risk professionals in the early stages of establishing an ESG agenda for their organisations, the initial focus should be on determining what exactly it means for the company, its stakeholders and third-party suppliers. Finding the right tools to support a more sustainable and responsible approach in this area will also be crucial.