The ESG Review: The benefits of a long-established and clear ESG strategy

At a time when huge global challenges are firmly in the ESG spotlight, it’s understandable that some local social initiatives can feel like a lesser priority, particularly when they’ve been in place for a long time.

There may also be concerns about the business spreading itself too thinly when there’s a need for a comprehensive approach across the ESG spectrum – as Harry and Meghan highlighted this week of course with their foray into sustainable investing.

But some UK firms, particularly those based outside London, have long-standing initiatives in place that are deeply embedded in both commercial outcomes and the purpose of the business. And if anything, at a time when how best to quantify the true value of ESG action is under the microscope, action taken during the pandemic has only made the value of these commitments more apparent.

Financial services company Hargreaves Lansdown, based in Bristol, sells shares, funds and related products to retail investors, and is one example. It has a three-pronged approach to ESG, from the perspectives of being a responsible business, a fund manager, and savings and investment platform. By applying rigour where needed in each of these three areas, the company has been able to take a “squad-based approach” to identify what action is needed and where, said HL’s Head of External Relations, Danny Cox.

Each has a director involved with responsibility for ESG, and through whom teams report regularly to the board. Most social factors fall under the responsible business focus, and include employee networks, diversity and inclusion initiatives, family-friendly and well-being policies and culture, and local community engagement. The latter focuses on fundraising both through HL’s charitable foundation and other initiatives including Feeding Bristol, sponsorship of local events such as St Paul’s Carnival and Bristol Pride, volunteering and mentoring schemes that support disadvantaged groups.

“We are guided by our purpose, to empower people to save and invest with confidence, to help them improve their financial resilience - and our charitable and public affairs work is aligned to this. We are increasing our work in this area, including working with an economics agency, policymakers and charities to help understand the issues and inform how people can improve their financial resilience. We continue to work on impactful, community-led initiatives, aiming to provide a big impact on a small number of initiatives. Focus to avoid dilution is really important,” he said.

The correlation between those local, or even hyper-local, social commitments and the impact that the business aims to make writ-large makes this ESG strategy a little unusual, given the degree of focus on the local community and the approach to driving broader value through those actions is wired-in, and resourced consistently.

Danny cites these examples: “The non-profit SouthWest Mentoring Awards were created in 2018 as a partnership across six organisations. When the pandemic broke out, we looked carefully at how best we could support our local community. In addition to colleagues fund-raising and donations by the business, we seconded a project team to our Local Enterprise Partnership to work as its task force on the region’s economic recovery. We have also just concluded the West of England Black Interns pilot project working with Bristol City Council and the mayor’s office.”

The impact is intended to begin at a grassroots level, but ripple up all the way to touch society generally. As HL has evolved from implementing CSR initiatives to having a broad, integrated and still-focused approach to ESG, so it continues to see how local action can have national or even international impact.

“The biggest impact we can make is to help clients with responsible investment choices – and with that the resources needed to support them. That is helped by the fact that our work on social factors is guided by our purpose and not directly to business KPIs. First and foremost, actions speak much louder than words and our primary focus is on doing the right thing,” said Danny.

For me there are several take-aways from all of this. Firstly, a long-established and clear ESG focus allows the business to decide what social factors and collaborations will allow it to further its purpose.

Secondly, it can then apply that focus to specific local initiatives knowing that doing so can create broader and meaningful impact.

And thirdly, having such a strong sense of purpose and aligning ESG commitments to that, rather than directly to the commercial value of the business, enables a clear focus on the social areas that matter most to “empowering people to save and invest with confidence.”

That final aspect won’t work for every business, particularly where shareholders expect to see a correlation between strategy-led action and commercial value. But the clarity of focus that HL is bringing to ESG offers lessons for many businesses about how to report purposeful value to the board, and drive traction via a relatively narrow list of commitments that make a difference on its doorstep, and well beyond.

The ESG News Review is written by Steve Earl, a Partner at BOLDT.

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