Working with NGOs, experts and other stakeholders can bring diverse perspectives and enhance the effectiveness of social initiatives, helping institutions navigate the less-travelled part of the ESG map.
Many companies track social initiatives solely for compliance or branding purposes, and only a quarter of the businesses are using a return on investment methodology for tracking social programmes.
By bringing in social impact experts, companies can drastically improve the way they measure the impact of their social initiatives and use that data to make rapid improvements.
2. Make a long-term commitment to a social strategy that makes business sense
Success lies in integrating social goals into the fabric of financial institutions’ business strategies.
If this alignment is not achieved, social impact may be perceived as a parallel initiative rather than an integral part of the business. It is notable that in the Index of Social Performance, only 38 per cent of financial services companies were linking their social strategies to their business strategies and operation models.
As mentioned earlier, funding for social initiatives is often unavailable as other areas tend to take precedence. However, improving a company’s social impact is important for long-term revenue generation, brand reputation and talent retention, and this should be reflected in how it is prioritised within a company’s business strategy.
In fact, for most financial services companies, improving social impact correlates with a growing customer base.
By adopting innovative technologies, streamlining processes and leveraging data analytics, financial institutions can enhance other business functions and create efficiencies that allow for increased investment in social impact initiatives.
3. Actively pursuing a holistic ESG approach
A holistic ESG approach is crucial, and financial institutions must give equal weight to social considerations alongside environmental and governance factors.
This involves moving beyond a “tick-box” approach to the “S” in ESG and truly integrating social impact into the core business strategy.
Financial institutions need to view ESG as an interconnected framework, where ESG factors are all essential features to building a responsible business.
For some companies, this will require a cultural shift and a re-evaluation of the metrics used to measure success. Rather than focusing solely on revenue or returns, institutions need to incorporate ESG metrics, including those that measure social impact, into their key performance indicators.
On the other hand, companies must ensure they are capturing all their efforts by effectively measuring and reporting social initiatives.
Financial institutions have a tendency to view what they do in the social space as not something that is legitimately part of a social strategy, and so they are in danger of underrepresenting their positive impact on the communities around them.
