Banking

Sustainable finance is a topic that has been gaining importance for governments and businesses across the world. During the MoneyLIVE APAC conference in Singapore in September 2022, Gobeyond Partners hosted a workshop to explore this issue with industry leaders and experts across the financial services ecosystem in Asia.

Here, Jasdeep Ghuman and Boon Phua look at some key insights derived from the workshop. A range of topics raised included: why companies are pursuing sustainable finance, common obstacles they face, and what can be done to encourage sustainable finance efforts.

Let’s turn to what sustainable finance is all about; sustainable finance means also reviewing businesses’ financial decisions through the lens of Environmental, Social and Governance (ESG), with a focus on longer-term investments into sustainable projects and economic activities (World Bank). It is increasingly making its way to the top of board meeting agendas and forms a key part of strategic discussions within organisations worldwide. Momentum has been building globally as financial institutions create new products and services that align across ESG efforts, while governments are establishing new policies and standards to meet targets set out in the United Nations’ Sustainable Development Goals. 

What are the drivers for companies to pursue sustainable finance? 

There is now greater emphasis and expectations for companies to demonstrate the moral obligation to do the right things for their people, business, and the environment. Given that Asia is home to over 60% of the world’s population and accounts for close to half of global greenhouse gas production, the region has a critical role to play in sustainable finance.

At the MoneyLIVE APAC conference in Singapore, there were robust discussions around the positives that sustainable finance has to offer businesses that choose to embrace it. Some of these benefits include: better working environments making for more engaging places to work, having a positive impact on communities, lower waste and pollution, with a move to renewable energy sources resulting in cleaner environments. Here are some of the key drivers which the group discussed:

Regulations are changing. New rules are being implemented as governments aim to play a significant role in the push for organisations towards sustainable finance. The need to abide by rules in such a regulated industry often puts pressure on financial institutions to accelerate change (but often not at the same pace as a profit-focused initiative for example).

Customers expect it. The scale of sustainable finance is still relatively small, but we have seen an influx of investors considering and – crucially – acting upon, their ESG considerations in the last few years. Concerns over climate change, human rights and equality all play an increasing part in their decision-making.

Demographics are reinforcing change. There is now a much larger demand for sustainable products and services by younger generations. Millennials are pushing demand for more sustainable investment offerings from financial institutions. According to KPMG, 81% of millennials were keen to know more about responsible investing and are twice as likely as older generations to want their pensions to be invested responsibly. Businesses can also leverage sustainable finance as a key Employee Value Proposition. This can attract talent who are keen to join organisations with similar values and commitments to sustainability.

Institutional weight is behind it. Linked closely to the above point on demographics, institutional investors are building ESG into their corporate strategy, with shareholders and clients expecting a broader range of investment opportunities. Organisations are also divesting from companies involved in unsustainable industries like fossil fuels, mining, and tobacco, which shifts market focus considerably. For example, some of the world’s largest national/sovereign funds have divested from investments in fossil fuels over the past few years and moved towards renewable energy investments instead.

What are the common obstacles companies face?

There are challenges related to regulation, costs, knowledge and timeframe, all of which were discussed by participants at the workshop.

Regulations differ across countries and regions, and traditionally the perception is that European markets are ahead of the curve. Is there enough being done by countries to meet the targets set out? We are also seeing different regulatory interpretations across regions, which lead to inconsistent views impacting sustainability standards.

Estimated costs associated with making such big changes could very well be in the trillions of dollars, so what types of support are available for organisations to start making changes? There is also a clear knowledge gap around this topic. Sustainable finance is such a substantial and diverse subject that even amongst an experienced group at the workshop there was insufficient knowledge to cover all aspects.

Sustainable finance is often not high enough on the strategic agenda. Some participants acknowledged that their companies could do more when it comes to incorporating ESG into their business strategy.

Can corporate strategy work with the longer-term timeframe required to achieve results from sustainable finance? We found that executives are often incentivised to deliver financial results quickly, with reward packages based on short-term results. This often leads to little or no incentive to think about the bigger picture and a longer planning horizon, leading some businesses to focus solely on short-term gains.

What can be done to encourage and support sustainable finance? 

A key challenge, much discussed at the workshop, was how to drive greater adoption amongst industry players. While incentives, rewards, and active recognition of sustainable finance’s benefits and organisations’ ESG responsibilities can all help to push the agenda, there are active costs involved in doing so.

We explored how different groups of industry players could start to make a difference:

Regulatory agencies

Governments and central banks can play a critical role in creating a conducive environment to nurture sustainable finance efforts. For example, Singapore is Southeast Asia’s largest market for sustainable finance, and the Monetary Association of Singapore (MAS) has since supported the issuance of over USD28 billion of green and sustainability linked loans. In addition, MAS established a Green Finance Action Plan to drive adoption of sustainable finance across the region, and partners with key players to establish a vibrant sustainable finance ecosystem.

While the industry looks towards central banks and governments to establish regulations, guiding principles and ultimately incentives around sustainable finance, regulatory bodies face challenges in doing so. Some of the concerns raised at the workshop include the need for regulators to ensure a level playing field, and questions around the ability to finance costs of such incentives.

While there is no one-size-fits-all solution, regulators could start by obtaining a clearer understanding on the intent behind best practices of other countries, and then assess the viability of implementing these practices internally.

Financial institutions and investors

According to the United Nations, 80% of the investment industry and more than 260 banks have committed to both the Principles for Responsible Investment and Principles for Responsible Banking. This represents at least USD2.3 trillion in sustainable financing since 2019. While critics have called out discrepancies between some institutions’ commitments and their actual investments, improvements to reduce greenwashing have definitely been made.

The concept of green banking is less prevalent in Asia than in Europe and the United States. To target the consumers ready for change and are willing to support sustainable financing, banks and insurers in Asia could consider introducing green banking products. This could provide a key differentiator and help capture first mover advantage. Private investors should make a concerted effort not to invest in companies or industries deemed unsustainable. Perhaps a testament to the industry’s efforts, the International Monetary Fund estimated the current value of ESG-related funds to be some USD31 trillion, with investments set to grow even further.

Businesses

Companies should actively embed sustainable finance into their core business model and seek to generate benefits for themselves and their customers. Rewards and recognitions can be changed to advocate longer-term investments in ESG efforts and products. Training can also be proactively provided to bridge the awareness and capabilities gap, particularly amongst middle management.

This does not just apply to large entities, as small and medium enterprises (SME) can make a difference as well. According to the World Economic Forum, there are over 62 million SMEs in Indonesia, Southeast Asia’s most populated country. This translates to one SME for every five Indonesians, and if they too are able to push for sustainable finance, these tiny ripples could culminate in a sizable momentum.

A collaborative approach

A major takeaway from the workshop was that, too often, industry players try to advance efforts in silo or adopt a wait-and-see approach. A more collaborative approach is needed, for example through the form of private-public partnerships or adopting an ecosystem approach to support sustainable finance initiatives.

Contact us to progress this topic further and build on how organisations can make a difference through their ESG and sustainable finance efforts.

Customer-led transformation remains front-of-mind for many organisations, particularly in the financial services (FS) industry. The promise of higher profitability, improved customer experience, greater capacity to manage risk, and better employee conditions is highly compelling, making the business case for customer-led transformation stronger than ever.  

During the 2022 MoneyLIVE Summit in London, I joined my colleagues from the wider financial services team at Webhelp as we hosted a Think Tank session to discuss what FS firms should consider when pursuing customer-led transformation. Participant discussion covered areas such as, how to recognise the value of personalisation and professionalisation, transformation through the integration of change initiatives, what the true cost of poor customer service is, and considerations for better customer experience measurement. 

Here are some of the key talking points and actionable advice that emerged from the discussion.

Professional and Personal Customer Experience 

Customers are making ever increasing, and varied, demands of the financial services brands they receive products and services from.  Their enquiries can often be ‘non-standard’ or complex in nature and require personal, human contact.  Therefore, the availability of highly skilled and compassionate front line advisors who can offer a level of personalised service was considered to be crucial. 

Participants also suggested that the organisations who develop a deeper level of curiosity around their customers can support the delivery of a more personalised service, and will undoubtedly gain a better understanding of their customers, their challenges and how best to resolve.  

Technology was highlighted as a key enabler to this more personalised experience. Participants agreed that creating a single holistic technology solution was far more valuable than implementing several individual, often disparate solutions, as this helps to enable personalisation and simplify processes, which the group felt could lead to greater customer trust and a reduction in unnecessary, often duplicate interactions.   

From a people perspective, leveraging the global talent pool and decentralising recruitment to enable customers to be supported in their primary language was also discussed as means of helping firms develop higher levels of customer trust and an improved reputation. 

Integrated Transformation Programmes 

The participants discussed a common challenge around transformation programmes where momentum can quickly be lost when involving many different functions or teams who lack an established singular, committed vision from the outset. In setting in place a clear vision, challenges around shifting the culture away from silos to a more collaborative approach could be alleviated, achieved through the involvement of all stakeholders at every step of the journey and gaining their trust and support. Too often, organisations have competing initiatives and priorities, often without realising it. 

According to participants, transformation programmes can often suffer from scope creep and be drawn out for long periods, or they are too ambitious and overarching, with unachievable goals in place.  Crucially, programmes are seldom broken down into a series of more manageable objectives. These delays can lead employees to lose confidence in the changes, so companies should first identify and communicate the problems they want to solve, break them down into smaller parts and consider deploying a core team of employees whose role it is to develop and design the appropriate solutions to tackle these problems.  These tactics can be hugely beneficial in helping shift a culture of silos to one of greater collaboration. 

The True Cost of Poor Service 

The participants were clear that poor customer experience impacted a number of areas, from reputation to revenue.  Discussion also focused on using the costs of poor customer service to support developing the business case for customer journey transformation.. Many elements came out of the discussion, including the importance of measuring the impact of reducing complaints, attrition, failure demand and remediation costs, alongside identifying improved revenue opportunities associated with happier, more loyal customers. 

Ensuring employees involved in delivering customer experience, whether front line or back office,  understand the revenue and reputational consequences of leaving problems unsolved was also discussed, with the importance of outlining success factors and confirming everyone’s role in delivering these factors deemed as crucial. This would include requiring firms to put potential poor service issues under the spotlight and expose them to everyone providing front line customer support.  

Financial services firms can limit the cost of poor customer experiences by balancing tactical and strategic initiatives while ensuring they use the right delivery approach in the right situation — agile vs waterfall, for example. However, participants pointed out that not all companies or teams are mature enough to go agile, and for the latter to work effectively requires many functions to align. 

Measuring Customer Experience 

The group cited measurement as a real challenge, noting that it is exacerbated by having to deal with disconnected customer journeys across multiple channels, leading to issues such as blind handoffs between departments and repeat contact and causing confusion and distress for customers. Additionally, journeys can often be designed around the “average” customer, which excludes the significant variety of circumstances seen throughout an entire customer base — something my colleagues at Gobeyond Partners explored in-depth when analysing the fraud customer journey. 

As a result, customer experience (CX) is then measured across multiple channels and platforms, often with no specific focus or common metrics that can inform CX strategy.  

Therefore, the ability to measure customer experience in a coherent, methodical and wide-ranging way is crucial, and there’s certainly no lack of data available in this context.  As is often the case however, it is understanding what can be measured and how best to do this that can prove a challenging stumbling block. 

Typically organisations in the financial services sector and beyond will have a direct feedback mechanism in place, usually surveys deployed after a customer interaction, but it is the opportunity to blend this direct feedback with the indirect and across the entire customer journey, that can make a tangible difference.  This indirect data is often sentiment based, derived from conversations with customers, in-person, on the phone or through live chat platforms, and with the right expertise and technology can be gathered at scale. 

Having this level of data structured in a usable way allows for analytics models to be built that can measure the value of CX improvements across the full spectrum of the customer journey, something deemed important with the think tank audience but often unavailable. The power of this indirect data will only grow, with the deployment of emotional detection solutions becoming more prevalent.  In a time where the cost of living crisis seems to be taking further hold on society, the technology and data that will enable front-line advisors  to have deeper, more meaningful conversations should become an important part of the overall customer experience. 

A common goal to deliver customer-led transformation

It’s rare to get so many leading customer experience leaders and decision makers from the financial services sector in one room and to have the time to talk in-depth about the challenges they face. From large retail banks to smaller challenger fintechs, there was a commonality in the appetite to deliver transformation that places customer journey at the core. Frustrations around how best to measure the end-to-end customer experience were commonplace within the group, as was the failure to recognise the cost of failing to offer customers the best possible service.    

The willingness of those in the think tank to engage in efforts to work more collaboratively on transformation programmes was a definitive positive and bodes well for transformation programmes going forward, as does a willingness to embrace technology as a key enabler for a better customer experience. 

The full article looking at ‘The business case for customer journey transformation in financial services’, upon which the think tank discussion was based, is available here

Hervé Mazenod is Gobeyond Partners’ Managing Director, Financial Services, and has over 20 years of consulting experience, 17 of which he spent in FS. An engaging leader, Hervé has managed multiple global transformation programmes, helping banking, pensions, and insurance organisations solve complex customer journey problems with innovative solutions. 

Find out more about Hervé here.