Throughout the day, discussions highlighted the rapidly evolving nature of sustainability reporting within the sector and the impact that regulatory frameworks have on shaping the way that Financial Institutions (FIs) think about the net zero transition.

From the complexities of reporting on carbon emissions, to the nascent field of nature-related risks, to crucial role of sustainability in creating long-lasting commercial value, three key themes were at the core of this event. This blog notes some of the key themes we heard.

Sustainability reporting highlights opportunities, not just risks

For FIs, sustainability shouldn’t just be seen as be a compliance exercise, but as a means of identifying material risks and strategic business opportunities. Too often the latter is forgotten.

Sustainability reporting and transition planning can enable FIs can integrate sustainability into the wider business strategy, for example by creating a roadmap of how they aim to further develop their sustainable practices — which in turn enables engagement across the business. Improved reporting practices throughout the value chain also enhances the availability of decision-useful information and encourages engagement with clients and customers. The enhanced opportunity identification through sustainability reporting enables institutions to mobilise greater sums of green and transition finance, which will help to accelerate decarbonisation across the UK.

Early firm gets the worm

By approaching sustainability reporting early, FIs can gain an advantage in a rapidly evolving landscape. Increasing their carbon footprint reporting to include voluntary scope 3 categories can create a stronger reporting environment whilst encouraging collaboration across the supply chain.

As this process begins, there can be difficulties in collating data, especially for categories such as financed emissions (Scope 3 Category 15), which tends to make up the largest share of emissions for FIs. With this brings another common challenge - how to ensure a high level of data assurance throughout the reporting process.

With regulatory expectations increasing, early action reduces future compliance pressure and allows for FIs to adapt in tangent with the requirements, rather than requiring major reactive action.

Proactive transition planning also allows for long-term resilience and allows FIs to set credible and realistic targets for their pathway to net zero, where they choose to have one. This headstart can create space for an FI to stand out in a competitive market whilst enabling new opportunities for growth.

When the world shifts, so must strategy

Geopolitics was referenced throughout the day, reflecting the volatile political and economic environment we are operating in. This volatility has implications not only for reporting – as transition plans must evolve with the times – but for sustainability more broadly. The keynote speakers, including Nigel Topping CMG (Chair of the Climate Change Committee), Saif Malik (CEO and Head of Client Coverage UK, Standard Chartered), and Thierry d’Argent (CEO, Société Générale London Branch), underscored a clear message: sustainability, economic resilience, and energy security go hand in hand, and the transition to a more sustainable economy will play a key role in strengthening the UK’s and Europe’s economies.

By mobilising long-term capital towards low-carbon solutions, FIs can support growth while positioning themselves at the forefront of the transition. This additionally helps to strengthen the UK’s energy security and resilience through periods of instability. Integrating sustainability throughout the business can also help to create more stable and future-ready business models that benefits customers, employees, and shareholders.

As the event concluded, it was evident that the financial sector has a pivotal role in driving the UK’s transition towards a more sustainable economy, with sustainability reporting and transition planning  at the forefront of how this transformation can occur. By proactively engaging in the development of sustainable practices, FIs can manage emerging climate and geopolitical risks and understand the impacts these may have on their practices, increase resilience, and discover opportunities to engage in real world decarbonisation and nature-positive projects that build the foundations for a more sustainable economy.

UK Finance will continue to engage with our members and government to help shape the journey towards a more sustainable economy.