What are you afraid of?

We understand the challenges for financial services organisations when it comes to communicating on ESG. The world is watching as the climate crisis escalates, social and cultural patterns evolve and pressure intensifies.  

From developing more sustainable investment strategies, to adopting practices that impact your operational procedures and the clients you engage with, there are a complex series of concerns for the financial sector to tackle. We are all expected to be working towards energy transition, and supporting innovative ways to ‘make a better world’, and increasingly your customers want brands to play a leading role in how we navigate forward[1]. 

Meeting your triple bottom line, and evolving expectations on ESG action is a marathon, not a sprint. Financial services organisations face a demand to communicate their efforts, but while sustaining shareholder expectations, the economy, and higher levels of prosperity, come under criticism from all corners for what, in essence, are the realities of not being able to transform overnight. Working out a sure-footed approach to what you want to say, and how to say it, is a high-wire act between accusations of green-washing and hushing, and it takes commitment.

When you speak up, it needs to be credible and more than just a feel-good exercise, but we know that financial institutions that adopt and communicate a serious strategic focus on ESG outperform their rivals[2]. More than that, as financial intermediaries, you are at the heart of ESG transformation — and this story needs to be told.

Rationale are experts in brand and content strategy and ESG storytelling for businesses operating in highly regulated industries, with complex multi-audience messages to deliver. We can help take away the fear, so you can have confidence in speaking out about your ESG activity. It’s the frontier of competitive advantage for those who get it right.

A clear approach to accomplish your ambitions

The ESG (Communications) RAFT

We have four interwoven principal areas that lead to success in communicating on ESG. Our RAFT model represents an approach to help focus an impactful communication strategy, and avoid a misstep.

1. Risk-informed goal-setting
Mapping where you are on firm ground, and where you might be exposed so you can play to your strengths. Accounting for regulatory, fiscal, shareholder and public perception.

2. Audience expectations
Pin-sharp understanding of exactly who, and what each key audience needs to hear, and what we want them to take away, or do.

3. Fearless communication
Identifying sure-footed messages that are confident, candid, moral and defensible. Everything you say is transparent, can be validated, and grounded in effective action.

4. Track and evolve 
We constantly monitor and are ready to evolve, to remain one step ahead of changing expectations from all stakeholders and audiences.

Risk-informed goal setting

It can be hard to take risks in financial services when operating in an environment where compliance is king. Knowing you have assessed and verified what stands on solid bedrock and what is liable to sink in the shifting sands of regulatory and fiscal jurisdiction, or court of public opinion, is important. You need to set goals that reflect both the formally required operational and performance reporting on ESG criteria, and your strategic external communication objectives.

Adapting to change
An increasing number of your stakeholders expect you to have strategies that – among others: reduce your environmental footprint; have supply chains free from modern slavery; operations free from unethical practices; diverse and equitable company cultures and programs to support communities. Additionally, your clients and the degrees of sustainable investment you are engaged in, absolutely impact your reputation. The timeline shifts, and near constant repositioning of guardrails or criteria for regulators, ESG ratings providers and industry benchmarking, mean constant monitoring of the latest developments must take place.[3] 

Meeting demands
Defining metrics and reporting frameworks can be tough with a variety of bodies offering differing guidance. These include, for example, the Global Reporting Initiative (GRI) standards, the Sustainability Accounting Standards Board (SASB) offering competing recommendations, and the World Economic Forum, which is now also trying to offer more centralised guidance and a move toward common ‘stakeholder capitalism’ metrics[4]. New legislation now in effect in the UK, brings some greater clarity, with the Financial Conduct Authority offering guidelines requiring firms’ public communications to be clear, fair and not misleading.[4]

With a strong understanding and mapping of where your strengths and proof points lie, based on the active ESG commitments you do establish — and viewed alongside the activity that might leave you exposed with similarly evolving audience expectations — we can move towards setting clear communication goals.

Audiences and what they care about

We need to look at those expectations, and confirm who needs to hear what, and when. But there is a distinction to be made first, between communicating on sustainability, and reporting on ESG, which are not the same thing. Sustainability communications will be targeted towards your customers, employees, suppliers, and community, whereas the main audience for ESG communications includes investors, regulators, and analysts.

Stakeholder expectations
It is critical to bear in mind that sustainability communications can, and should, reflect social as well as environmental impact — it doesn’t all have to be about your green credentials. As many in the financial sector, and beyond, are finding out, increasing scrutiny and accusations of greenwashing are being met with advertising standards intervention, reputational damage and significant financial penalties as well.[5] 

There is also an important distinction to be made between communication and engagement. Are we simply information sharing, or pursuing relationship outcomes? Transparency is important for credibility everywhere, but where certain information is a priority to a regulator or investor eye, consumer perception or talent attraction might be better satisfied with something else.  

Mapping audience needs
Our discovery process at Rationale means we go and ask. We map relative stakeholder power, level of interest, and what their attitudes or receptiveness might be to the social and environmental issues on which you’ll be communicating. For example, sharing the right amount of transparent reporting on progress against your climate commitment in one setting, acknowledging the ground yet to be made, while celebrating your industry-leading performance on diversity and inclusion in another.

Fearless communication

Equipped with insight from defining the risks, who we are speaking to, and the expectations or judgments we expect each of them to make, it’s time to start pulling on those proof points and stress-testing their integrity. We can then articulate the right messaging, and amplify through the right channels, content or campaigns to best express your position. 

Clear parameters
In external communications, if you are currently off pace on (E)nvironmental transformation, there are opportunities to spearhead your narrative around the (S) and (G). Regardless, we can hold ourselves to clear parameters in order to traverse that high-wire with confidence. These parameters include:

• being honest and accurate 
• being clear and unambiguous
• only making substantiated claims 
• not hiding important information 
• making meaningful and fair comparisons 
• speaking to your whole service lifecycle
• conveying grounded, but genuine optimism

Internal engagement
Internal education is also key. Make everyone part of the solution. Creating buy-in and alignment across the business feeds back into surpassing your business objectives. Activating and amplifying your ESG comms strengthens engagement and culture, which, in turn, supports talent attraction and retention — which we know is a particular challenge within financial services right now. With skills gaps and talent shortages because employee priorities are shifting, and competing with other dynamic sectors for the best candidates in emerging roles, confident messaging on ESG is a known draw.

How you say it
We also look at the subtleties of language and tone of voice. Black Rock’s Larry Fink, for instance, made a bold step in declaring commitments to investment strategies that would distance themselves from any clients who are not matching their own climate action or net-zero targets. At the same time, he is a high-profile example of a trend towards evolved messaging, speaking about energy transition, stakeholder capitalism or climate investing, rather than ESG[6]. Precise use of language, tailored for the right audience, goes a long way in avoiding a misstep.

Prior to any communications being sent out into the wild, we again reflect on our established risks by conducting a pre-mortem to anticipate negatives. We have compelling stories to tell, and can tell them without fear of regulatory and legal ramifications, or loss of brand equity.

Track and evolve

Climate risk is financial risk, and you are in the business of risk management. Global markets and the flow of capital need to be sustained. But as already mentioned, and worth emphasising, financial institutions will play a pivotal role in making sustainability ambitions a reality. 

Monitoring impact
Maintaining your communications strategy on ESG does carry risk. To mitigate this further, while you are out there telling your story with clarity and confidence, a critical factor in your strategy needs to be monitoring and evaluating how well it is landing with your audiences. While you remain on top of the regulatory and legal shifting sands, likewise you need to keep listening out for changes in the expectations of clients, investors, and wider society.

Adapt and be agile
Remaining agile and ready to adapt or evolve your messaging is critical so you can remain on the front foot. This of course applies to your formal ESG reporting, but especially your external brand, content and campaign communications. Being alert and responsive to fluctuations in expectation, or shifts of focus and priorities is essential.

Core truths and measured gains
So remain vigilant and adaptable to emerging risk, but hold onto the core truth — of the necessary and vital role the financial sector has to play in driving innovation and realising opportunity and prosperity. Particularly through sustainable investment, adhering to your ESG commitments, and holding clients and partners to meeting their expectations as well. 

Having a clear view of your risks allows us to shape a narrative that remains transparent and honest about where you are, while focusing on information sharing and storytelling that emphasises measurable success. You temper your promises and ambitious pledges to avoid hyperbole. You avoid green- or purpose-washing, and crucially avoid hushing too.

Our RAFT model and approach help increase confidence to continue telling your compelling story. For financial institutions, by speaking up on your goals, celebrating your achievements, acknowledging the journey you are on, and emphasising the important role you will play in helping us realise a more sustainable world, you can avoid any missteps.

Rationale is here to help you assess the risks, and establish truths to engage your audiences in the right way. Together, we can traverse the high-wire, communicating a fearless story that avoids criticism and invokes deeper trust. 

Please get in touch to arrange a free discovery consultation with us to discuss your challenges.

References

1. https://www.pwc.com/us/en/industries/financial-services/library/reporting-and-esg-story.html
   https://www.deloitte.com/content/dam/assets-zone2/lu/en/docs/industries/financial-services/2023/lu-do-sustainable-banks-outperform-driving-value-creation-through-ESG-practices-report-digital.pdf
2. https://www.edelman.com/trust/2023/Trust-barometer/business-unshakable-force-polarized-world#:~:text=According%20to%20this,other%20pressing%20issues
3. https://kpmg.com/xx/en/home/insights/2024/02/esg-regulatory-essentials.html
4. https://www.fca.org.uk/news/press-releases/fca-confirms-anti-greenwashing-guidance-and-proposes-extending-sustainability-framework
5. https://www.pwc.com/us/en/industries/financial-services/library/reporting-and-esg-story.html
6. https://blog.cleanhub.com/greenwashing-examples
7. a. https://longitude.ft.com/standing-out-from-the-crowd-in-esg/
   b. https://www.forbes.com/sites/jonmcgowan/2024/03/27/blackrocks-fink-calls-for-energy-pragmatism-omits-esg-from-annual-letter/#:~:text=Following%20the%20conservative%20backlash%20of,sustainable%20investing%2C%20or%20climate%20investing