Introduction

The report delves into how financial institutions in Australia are implementing Environmental, Social, and Governance (ESG) strategies. It highlights the need for organisations to adapt their operations to meet sustainability goals, focusing on both the risks and opportunities during the implementation process. The report stresses the importance of long-term commitments to drive transformation. An implementation checklist is also provided in the report, guiding organisations on how to effectively turn ESG strategies into action.

The front office as an agent of change

ESG is now integrated into the core operations of financial institutions, particularly in front office activities such as lending and investment decisions. The report outlines how ESG targets are becoming standard practice across teams. It is noted that 77% of Asia-Pacific investors reported better performance from sustainable investments, demonstrating the economic benefits of adopting ESG principles in financial decision-making.

Leading for constant change

The role of ESG teams has expanded significantly, evolving from advocacy to core operational responsibilities. Sustainability is now a central business function. The report emphasises the need for sustainability leaders who can coordinate across the organisation, implement systems thinking, and advocate for ambitious ESG goals. This shift requires leaders who are adept at managing change while integrating ESG into the broader business strategy.

The race for technical and specialist talent

As ESG reporting becomes more sophisticated, the demand for technical experts in fields such as climate science, data analytics, and human rights is increasing. The report notes that 94% of hiring decision-makers face difficulties finding the specialised talent necessary for ESG implementation. Financial institutions are prioritising hiring these experts to help them meet complex reporting requirements, such as scope 3 emissions, and to reduce risks associated with non-compliance.

Toolkit: how leading FIs train staff on ESG

The report includes case studies of financial institutions like Westpac and Allianz Australia that are actively training their staff on ESG topics. These institutions use methods such as workshops, newsletters, and formal training programs to upskill their workforce.

Building teams with a mix of traditional finance skills and ESG expertise is vital for successful implementation. This approach fosters collaboration and ensures that sustainability considerations are embedded into financial decision-making processes.

Embedding accountability

The report highlights the importance of establishing formal accountability for ESG performance. While many financial institutions have begun incorporating ESG-linked key performance indicators (KPIs), the process of embedding genuine accountability is still in progress. The challenge lies in clearly defining which teams are responsible for different aspects of the ESG strategy and aligning these responsibilities with long-term objectives.

The critical importance of data

Access to accurate, scalable, and cost-effective data is crucial for informed decision-making in sustainability. The report reveals that data limitations are the biggest obstacle for financial institutions in addressing climate-related risks, as many lack reliable information to monitor and report on ESG exposure. The ability to collect and analyse data effectively, especially on scope 3 emissions, is key to meeting regulatory and stakeholder expectations.

ESG governance: the next big implementation challenge

Boards are increasingly focused on ESG, but the report shows that many have not yet moved beyond climate risk. While 80% of boards regularly review climate risk, other crucial ESG areas like biodiversity and human rights are often overlooked. The report calls for difficult conversations at the board level to ensure comprehensive oversight of all ESG issues. Proper governance frameworks are necessary, with ESG integrated into regular board discussions and clear accountability established. Financial institutions are encouraged to use existing structures to improve governance, but it is essential that responsibility for ESG is clearly distributed across the organisation.

Conclusion

The report concludes that while progress has been made in ESG implementation, significant challenges remain. Achieving long-term sustainability goals requires ongoing transformation, including stronger accountability, better governance, and improved data management.