Financial Services sector needs leaders who lead on ESG

The variety of views is not surprising given the huge number of events affecting the sector such as the war in Ukraine, high inflation rates mainly due to rising energy prices, increases of the interest rate, climate change, and a highly competitive labour market. This resulted in a neutral outlook for 2023. Rosanne Ferrari and Bram Tijsseling of Odgers Berndtson conducted qualitative research amongst executives and non-executives and this State of the Union highlights the most common themes shared amongst the participants.

It’s mainly about the E in ESG

While doing business, having a vision on ESG is crucial to succeed in 2023. The 'E' of ESG is Environment, and claims most of the focus: greener investments, circularity of materials, the energy transition and sustainable real estate. The S of Social, which covers diversity, equality and inclusion is considered important, although this receives less focus. Same for the G of Governance. The crypto industry was mentioned various times as the governance seems to have not been in place to prevent the failure of the crypto currency exchange FTX. Have we not learned anything from the past?

Back to the 'Environment'. This is considered a potential game changer for both clients and employees. Whether it is banks providing financing to clients to make the energy transition, asset managers and pension funds making ‘truly’ green investments, real estate companies and investment managers building and funding sustainable buildings, insurers ensuring insurability of all clients or leasing companies funding only EVs, the financial services sector can make a difference!

The financial services sector can have this impact, this however will depend on two things:

1. The people in your organisation need to have the right conversation with clients;
2. The depth of the expected recession, and the impact this will have on the behaviour of the public.

That is where we still see much reliance on leaders who truly believe the above is central to society and the success of the organization, hence sustainability will be a wide-spread belief in your organisation and amongst the public in times of recession and high inflation.

“To facilitate change in organisational culture and beliefs, I first have to dive deep into my own morale, and adjust my own views.” - Executive 

Next-level leadership is required

The idea of what effective leadership looks like is shifting. External and internal developments are occurring on all levels and this requires much more from leaders than reading the numbers and setting the direction. Agility, the ability to navigate the organisation through the sea of challenges, still remains to be a key competency of leaders. This is also reflected by expectations to be the “hero”, a role model who leads by example based on vision and beliefs (also see the paragraph about ESG), and the “guide”, a leader who aims for connection, serving all stakeholders and at the same time motivating and inspiring others to excel.

Based on our discussions the leadership transition can be put into three phases. In the past the executive set the strategy and direction and the organisation followed. Next came executives who set the strategy and direction and ask the management team “what do you think?”. Nowadays leadership requires an individual approach while achieving tangible results. Not only setting the direction but also ensuring this is operationalised. Result and change execution is another key competence for leaders while having an eye for the individual. Can you be the “chameleon” who still drives solid business results. This is what we have called “Next Level Leadership”.

The role of the Supervisory Board is therefore also changing. Not in the formal sense, but more informally. Supporting executives with dilemma management in this increasingly complex environment, being transparent and consistent in their decision-making and communication to all stakeholders, all while maintaining good governance.

“There is no one-liner in Leadership” – Non-Executive

Has the world become bigger or smaller?

How we perceive the world, nearby and far away, is under influence of what comes to us. In some sense, our experience of it, is that it has become smaller. Recently, more and more people are retreating into their own circle and safeguarding their personal territory. From a business perspective the world also seems to be smaller than in the past with production facilities being near-shored and supported by more protective policy making

In terms of information availability and sharing on the other hand, the world has expanded, with vast amounts of information spreading at high speed around the globe. As a result, people now carefully weigh their decisions around questions like, “with whom do I want to spend my time and where do I want to spend my time on?”.

Diversity, Equality & Inclusion requires continuous focus

Topics like diversity, equality and inclusivity continue to direct the agenda of leaders. How do you adapt to these new ideas and what is your personal belief about it? Exploring best practices of other countries and sectors can provide new insight and inspiration. The Nordics seems to be a great role model for most of the participants in this research.

“In Scandinavia people think radically different, and therefore act way ahead of the curve. We can learn a lot from that. They excel in equality and offer much better facilities.”

These days, where people desire hybrid work and scarcity of talent is commonplace, leaders are well aware of the important needs that arise. The need for an inspiring environment, a healthy work-life balance, a good culture that supports happiness and most of all; the need for purpose.

Next to this, what will the next generation; generation Z bring us? How can we attract the leaders of the future and make sure they will stick longer with an organisation? These are the questions we see a lot of our clients currently dealing with.

Advice to your younger self

We have also asked our participants what advice they would give to the younger version of themselves. First of all, the majority agrees upon the key factor; the promise to stay true to yourself, trust your instinct to find out what you really want, and use a coach, if necessary, to hold up a mirror. Secondly, they have also learned that they don’t need to do it all by themselves; be aware of that and at the same time you have a voice and make sure you share your opinion. Thirdly, make yourself familiar with technology to create more efficient processes. Finally, time is more important than money.

2023

Turbulent times are ahead of us and leaders need to be prepared. The playing field is changing and it is uncertain how this will play out. One thing is certain; the financial services sector is right in the center and can have a real impact on the years to come!