ESG reporting offers important opportunity to rebuild public trust in financial services

By Emily Church

You don’t need to be psychic to know that, for the UK population, trust in financial services – particularly the banking and asset management fields – is pretty low. Whilst cynicism has tended to be an ever-present facet of the investor psyche, over the last decade or so expectations have declined even further, resulting in a stand-off where it doesn’t matter what companies say about themselves because no one knows if they can believe it anymore.

This sentiment was starkly underscored by SEC Newgate UK’s latest ESG Monitor Report, a survey of more than 12,000 consumers across 12 different countries. The findings should strike a chord with financial companies of every persuasion with just 1 in 10 saying they are well informed about the ESG activities of businesses, and 7 out of 10 claiming that companies need to communicate the results of their ESG efforts more clearly for consumers and investors. To further emphasise the challenge financial services faces in terms of consumer trust, 43% of respondents agreed that they do not have faith in what companies claim about their ESG performance – a significant proportion that could grow further if not handled properly.

All of this points towards a huge opportunity for the financial community.

Just 5 years ago no one talked about ESG, or sustainability, or Net Zero outside of specialist agencies and businesses. Fast forward to 2022 and the concept now occupies space in the public consciousness whether they recognise it as ‘ESG’ or not. Financial Services has, along with many other industries, been caught on the hop. The concept of ESG investing for example is still in flux and the reporting mechanisms to measure impact and provide accurate, transparent ESG data to investors are evolving. This means that the industry hasn’t been quite ready to answer certain questions as quickly as investors and regulators would like, but if the last 5 years have been any indication of how fast things can progress, we can expect even more to be achieved over the next half a decade. Now is not the time to pull back; now is the time to develop enhanced standards for sustainability data that is verifiable by independent auditors and allows consumers to make meaningful comparisons when choosing their financial providers.

Thankfully, the report is clear that trust can be rebuilt – nearly 2 in 3 respondents agreed they would give a company a second chance if it is transparent about its mistakes and takes clear steps to improve. If financial firms can invest in frameworks for trustworthy and robust ESG data, the next few years offer a vital chance to establish a new connection with their audiences grounded in transparency and authenticity.