ANBIMA (Brazilian Association of Financial and Capital Market Entities) conducted a revealing study on the importance of sustainability and ESG in the financial market.
This study has shed light on the financial institutions’ maturity and understanding of ESG practices.
ANBIMA’s survey evidenced a great diversity of perspectives in the financial market regarding the theme of sustainability.
As a result, five different behavioral profiles were identified, ranging from financial institutions that are skeptical of ESG practices to those that put sustainable criteria at the heart of their business.
Five behavior patterns based on positioning and understanding of the topic
The survey conducted by ANBIMA aimed to understand the relevance of the sustainability issue in the participants’ view and how this perspective is reflected in their respective institutions.
This study involved more than 900 financial market institutions, including third-party asset managers, commercial, multiple, and investment banks, as well as brokerage houses, securities dealers, and others.
At the end of the study, five behavioral patterns were identified, indicating the possible paths that ESG and sustainability can take to be implemented more effectively in the financial market.
These profiles are: Distrustful, Distant, Initiated, Emerging, and Engaged.
1. Distrustful (4.2%): The view of sustainability is presented as a threat or misunderstanding and doubts about the topic arise.
Financial institutions that are suspicious of ESG practices and do not consider the topic as relevant to their business. In a general context, they present great difficulties in measuring and monitoring their impacts.
These institutions are skeptical of ESG practices and believe that they can have a negative impact on financial results.
Characteristics pointed out by ANBIMA:
- They see sustainability as an obstacle to business development, which impacts the action of raising funds;
- They almost always use subjective criteria to determine what sustainability is, sometimes trying to justify that their investments are ESG, without paying attention to the existing concepts;
- The executives who are spokespersons for this discourse are distrustful, do not see value in ESG aspects, and often denote a lack of clarity on the subject;
- They have not moved to implement concrete actions towards sustainability and have not inserted sustainable aspects into the institution’s commitments and processes.
2. Distant (35.5%): Relates the idea of sustainability to environmental issues
The company does not view the topic as relevant to business. The institutions that fit this profile believe that sustainability is important, but do not see it as relevant.
It is usually associated with environmental issues and has little to do with corporate and social governance.
Characteristics pointed out by ANBIMA:
- They have a simplified view of the topic, perceiving sustainability as an exclusive commitment to the environment;
- They link sustainability to environmental issues. Managers conclude that the topic is far removed from their business, especially when it comes to a small office that produces little waste, consumes few resources, and therefore has no relevant impact, negative or positive, on the planet;
- They show a mismatch between actions and conceptualizations of sustainability. They have a low level of implementation/dissemination of sustainability concepts and may present inconsistencies in their statements.
3. Initiated (32.1%): Idea of sustainability related to environmental issues, but with concrete actions
These financial institutions are taking the first steps in implementing ESG practices, but do not yet consider them as central to their business. Sustainability is relevant, but not essential.
It continues to be associated with environmental issues, but this group shows a broader perception of the theme and a greater concern for risk management.
Characteristics pointed out by ANBIMA:
- They also relate sustainability strictly to environmental issues, but they have concrete internal actions, because they see possibilities to cause transformation within the business, even if it is small;
- They are structuring themselves in some way to include sustainability in the day to day of the institution and business;
- They cite as examples of impactful actions the use of led light bulbs in the office, the installation of timers on faucets, the efficient use of air conditioning, and the practice of selective collection in the building;
- They point to the recent digitalization of processes and signatures as an important contribution, which has led to a decrease in the use of printing-related resources. These are positive attitudes, but they do not go beyond the office environment or directly influence the company’s main activity.
4. Emerging (21.5%): Idea of sustainability as a broad commitment that encompasses environmental, social and governance areas
For this group, sustainability is an important issue and is linked to several aspects of the life of financial institutions.
Democratic management, respect for the law, and good relationships with stakeholders are fundamental to these companies.
Characteristics pointed out by ANBIMA:
- They have a broader view of sustainability, embracing at least two pillars of the ESG, that is, they already perceive sustainability beyond caring for the environment;
- They showed further development, with full implementation of one or more major items, and an adequate conceptualization of the sustainability issue;
- They are more committed to social or corporate governance issues;
- Sometimes they show that they are engaged in carrying out or financing philanthropic projects, mainly related to education and sports. In some cases, they encourage employees to participate in social work and volunteer initiatives;
- Some institutions cite the benefits granted to employees as part of a social commitment;
- The asset managers in this group generally have more advanced ESG investment analysis practices that encompass all three factors, and many have responsible investment and engagement policies with their investee companies. They also adhere to voluntary commitments.
Engaged (6.8%): Sustainability is part of the institution’s strategy, a fundamental commitment and also profitable
This group of institutions is aligned with ESG practices and understands sustainability as a factor for business growth.
The theme is discussed in the strategic decision-making processes, in the company’s goals, and in product definition.
Characteristics pointed out by ANBIMA:
- They show full coherence between sustainable concepts and attitudes to work with sustainability;
- They have fully implemented the main ESG practices and define themselves with phrases like: “When it comes to sustainability, everyone always wins;
- ESG aspects permeate strategic decisions and require leadership to have transparent criteria about making, what kind of customers they serve, and with whom they partner;
- They have a clear understanding that sustainability needs to compose the structure of the business itself, and not be practiced as projects apart from the organizational structure of the institution, such as philanthropic ones;
- They have managed to turn sustainability into products and services that honor social, environmental, and governance commitments, such as credit lines for clean energy projects or green investment funds;
- Such institutions are able to have a vision that goes beyond business and understand the global importance of sustainability;
- Among management companies, they demonstrate more mature and comprehensive ESG analysis processes.
ANBIMA’s study also highlighted that the adoption of ESG practices in financial institutions goes far beyond a simple strategy.
The survey showed a notable difference between the attribution of importance for sustainability and the actual adoption of the measures in practice.
Importantly, cybersecurity is becoming increasingly important in the context of ESG practices.
Cyber risks have a significant impact on organizations and investing in cybersecurity is becoming increasingly relevant in ESG practices.
ESG goes far beyond a strategy for companies
The theme of sustainability has been growing in companies in recent years, however, the survey shows that there is a difference between the attribution of importance for sustainability and the adoption of sustainable actions in practice.
Many of the organizations that responded positively to the questions about perception and importance of the ESG theme indicated that they still do not have concrete actions within their institutions.
In fact, there is a growing movement among companies to focus on environmental, social, and governance factors. This focus is driven by several factors, including the need to deal with climate change, growing social inequality, and stricter government regulations.
Although some companies have been slow to adopt this change, there is a compelling argument that ESG is good for business.
Companies that focus on ESG tend to have better reputations, which can attract more customers and talent. They also tend to be more innovative and efficient, because they are constantly looking for new ways to improve their environmental and social impact.
In addition, companies with strong ESG practices generally enjoy lower costs because they are able to reduce waste and manage risk more effectively.
In summary, there are many good reasons for companies to focus on ESG. Those who do are likely to find that it is good both for their bottom line and for the world around them.
CipherTrust: investing in cybersecurity is relevant in ESG practices
Cybersecurity is becoming increasingly important for businesses, especially as the number of threats increases.
Cyber risks have a significant impact on organizations, potentially leading to disruption of operations, theft of confidential information, and even violation of regulations.
For these reasons, investing in cybersecurity is becoming increasingly relevant in ESG practices.
In addition, companies that invest in cybersecurity tend to be more resilient and less likely to suffer disruptions to their operations.
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