“They are liars or they’re just stupid and they don’t know”. This is how Arnold Schwarzenegger described those who still believe that “going green” is economically detrimental to a business or country in an interview with Radio 4 last week.
California currently has a GDP of 3.3 trillion dollars, making it the largest economy in the US and the 5th largest economy in the world. As the former governor of California, Schwarzenegger played a pivotal role in achieving this whilst simultaneously promoting the state as a world leader in environmental legislation through the enforcement of strict environmental laws.
During the interview, Schwarzenegger also discussed the importance of working together and this has been further highlighted during the COP26 discussions. However, one of the largest questions remains: how can countries and businesses work together to meet new targets? Hence the requirement for workable and realistic solutions to climate and other environmental, social and governance (ESG) related issues is more pertinent than ever, particularly for those on Boards across the world.
Don’t be stupid and don’t not know
If you are interested in knowing more about practical ways in which Boards can address ESG challenges, this blog post is the first in a series addressing the topic, aiming to provide realistic solutions for board members and businesses. Sacha Sadan, the FCA’s director of ESG, is speaking at one of our Financial Services Faculty events on 16th November COP26 – What next for Financial Services? Sign up here. We also have a session on the 18th which you can sign up to here.
If you would like to join these conversations, sign up to our Transpire Connect network, where you will have access to exclusive content and ESG specific faculties. Keep up to date with future webinars via the Transpire LinkedIn page, or sign up to our mailing list.
Switching up rather than giving up
BlackRock’s Hildebrand stated that “we have to have that mindset of a complete transformation of everything we know about how the global economy works” (FT, 2021) and acknowledging this a key step in finding practical answers to ESG questions. This is important for all individuals, companies, industries and countries since they will all be affected in some way. However, changes made to address ESG do not necessarily adversely impact individuals and businesses.
In his recent interview, Arnold Schwarzenegger claimed that people “need to switch up not necessarily give up things” and gave two good examples. Firstly, switching from a diesel to an electric car – people do not need to give up travelling, rather they need to switch up the way in which they do so. Secondly, reducing meat consumption – through switching up their diet Schwarzenegger suggested that people would gain rather than lose through better health. This individual level philosophy can be applied to businesses and even whole industries, as recently demonstrated in the financial services industry.
The use of ‘probing questions’ in the financial services industry
The Financial Conduct Authority has stated in its most recent climate adaptation report that “probing questions” will be posed to encourage all companies to participate in combatting climate change. The climate related changes in the business will encompass the three statutory objectives of the FCA which involve:
- Securing an appropriate degree of protection for consumers
- Protecting and enhancing the integrity of the UK financial system
- Promoting effective competition in the interests of consumers
Due to the growing consumer interest in ESG, the report recognised that new services should be realistic in order to avoid ‘greenwashing’. For example, in terms of consumer protection, green services should put the “needs and preferences” of consumers as a top priority whilst ensuring transparency to maintain market integrity. Furthermore, the report emphasised the importance of including high-quality information and climate risks in business models to allow effective customer choice. In addition, the new requirements for the inclusion of ESG information will allow investors to make climate informed decisions.
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