CBI Sustainable Finance Discussion Paper

This pledge has not happened in a vacuum and is accompanied by a renewed focus on sustainability across a wide variety of stakeholders, from government to business.  

To help capital flow in a way that supports sustainability financial services firms have a large role to play. Every financial services firm is at a different stage of its sustainable finance journey. Most businesses are now legally required to measure and report their carbon footprint and have implemented processes to reduce emissions. Many are going further by being conscious of ESG commitments in their lending and investment decisions, as well as developing sustainable products and services for their customers. 

From the E to the SG, and your supply chains 

While the first phase of the ESG movement saw the majority of companies focus on environmental concerns – the “E” of ESG – the second phase has an increased focus on Social and Governance priorities as part of overall resilience across the business environment.  

This second phase of ESG also has major implications for relationships within supply chains.  Investors are likely to examine how the firms they have invested in are delivering against their metrics on a number of social and governance factors. They will also be looking to see how firms are driving changed behaviours through supply chain management as a route to improving resilience. 

The upside 

Whilst changing behaviours as a business to align with ESG standards can be time-consuming and expensive, it comes with plenty of upside. Consumers, investors, and government’s alike are starting to show an affinity for businesses that emphasise ESG. For example, in the CBI Everybody’s Business Report published in 2020, 67% of respondents felt more committed to an employer whose purpose and values align with their own. Furthermore, the UK’s social impact market has been growing at a rate of at least 30% each year since 2015 and grew to more than £5bn in 2019.  

“The market’s impressive growth is being driven in part by increasing awareness of and confidence in taking on investment by social enterprises and charities. We have also seen growing interest in investing with purpose, which has prompted fund managers to create new and innovative products. This increase in products and capital has created more options for both investees and investors – helping capital to flow where it is most needed.” - Jeremy Rogers, Chief Investment Officer, Big Society Capital 

This paper aims to raise the profile of the discussion around sustainable finance and the importance of facilitating the flow of capital necessary to support the transition to more sustainable businesses that deliver for people, plant and prosperity.