As part of the #sustainabilityletstalk15 initiative, I recently sat down with Murray Coxon. Murray acts as a Financial Facilitator, providing transaction packaging and high-end capital for business. We discussed specifically the banking and finance sector and what sustainability means for the industry.
My biggest takeaway from our conversation, whilst a lot great work has been done towards sustainable development of the financial industry, there is still a long way to go, with some significant risks in front of us if we don’t disrupt and adapt.
Many of Murray’s observations and thoughts of his financial sector experience, are mirrored in the recent article by The World Economic Forum ‘How can we create a financial system fit for the modern world’. The article comments on how fixing the global 2008 financial implosion took a significant effort that can be applauded, but IMF’s former first deputy managing director states ‘there is still ‘unfinished business’ and that we’ve hardly begun when one takes into account the changes needed to secure adequate financing to deliver the needed transition to sustainable development’.
Q: WHAT DOES SUSTAINABILITY MEAN TO THE INDUSTRY?
A: Globally, we are carrying a $200 Trillion debt. That is a lot of money. With global GDP decreasing, we are not being productive in comparison to capacity, combine this with the amount of debt we are carrying – it is not a good outcome. (As a side note to give an indicator as to just how much that is, Deloitte UK shared ‘Govemageddon – If the UK Government Debt kept rising at it’s current rate, by 2034 the UK would spend more on servicing debt than on public services’).
However, there can be a positive to this scenario. There are significant opportunities for improved standards, policies and practices, combined with the application of new business models, can and will turn this around. This however needs to be realised and acted upon. It is heading that way, though there is a long way to go.
Sustainability in financial services is not just about green investing, it is also about adaptability, being able to move quickly and meet the needs of markets, whilst accepting competitiveness is part of it. Essentially, we need to realise the current model is not sustainable; it has to change. If the banking sector sit on their hands and do nothing, it will be a slow death.
Q: HOW INTEGRAL IS BUSINESS SUSTAINABILITY TO ITS STRATEGY?
A: Sustainability needs to become an important and significant part of financial industry strategy. The current model needs to shift and change across its contribution to: corporate sustainability and the products and services that are offered. Policy and standards have to catch up and meet the market – part of this is accepting there is financial services competition that is only going to get stronger, faster and better.
There is starting to be more interest and investment in these areas, though we have a while to go until we reach the tipping point.
Q: WHAT KIND OF CHALLENGES DOES THE INDUSTRY FACE?
Competitiveness: The current business model has to change across the products and services that are offered. There is a strong need and urgency to embrace competitiveness. EG. Peer-to-peer, crowd funding, bit-coin. They probably won’t overtake, but these methods of financial services are here to stay. We need to work with it, not against it.
Technology adaptation: This is significant, particularly in finance and lending, and ties into embracing competitiveness. The financial services sector is still using old dated methods, which are slow, time consuming and waste important resources. There is a need to catch up to the market here.
Corporate Sustainability: Within Australia alone, the banks made a net profit of $30bn collectively in 2014. This needs to be put back into the community in a measured and strategic approach.
As an example, Standard Chartered is a leader as sustainability is integrated to create a competitive approach, with new opportunities developed as a result, whilst managing key sustainability risks. Standard Chartered recently committed to the UN Sustainable Development Goals as a supporting partner, further leading the way in community development.
Start-ups: Start-ups are a significant part of our economy, particularly when it comes to technology and innovation. Quite often, they need funding to get started. And sometimes it can take a very long time for that funding to be approved, too long that the opportunity is missed. The finance and banking sector very much need to change their thinking and adaptability around the needs of business, particularly start-up funding.
The financial sector is starting to recognise the challenges and risks of not adapting, but there is a long way to go. If they don’t adapt, they will lose out.
Q: WHAT ARE FIVE WORDS THAT MAKE YOU THINK OF SUSTAINABILITY?
Murray opted for more than five words, and to be fair, my top sustainability words are at about nine.
- Unsustainable debt
- Change of mindset