The report provides Vigeo Eiris’ exclusive opinion on sector vulnerabilities, controversies and emerging risks, as well as strengths, innovations and best practice in terms of CSR.
The report highlights sector ESG challenges and emerging issues, as well as performance scores and advanced indicators on critical issues such as energy transition, business ethics, due diligence on social and environmental risks in the supply chain, human capital and human rights, governance, executive remuneration, transparency on taxes, integrity of lobbying practices, the level of sustainable products & services, and contribution to the UN Sustainable Development Goals.
• The Financial Services General sector is composed of integrated retail financial service providers, market place organisers, asset managers and brokers, investment, private equity and holding companies.
• Vigeo Eiris awarded an average overall score of 28.6 to companies in the Financial Services General sector, on a scale of 0 to 100. The sector’s performance has slightly increased since our previous analysis.
• The sector ranks 30th out of Vigeo Eiris’ total research universe of 4,500 companies, divided into 39 sectors. Previously, the sector ranked 32nd.
• Sector leaders are concentrated in Europe, whilst laggards are mostly located in Emerging Markets.
• The Financial Services General sector reporting rate is 52%, below the universe average (54%), with European companies being the most transparent.
• ESG risk mitigation scores are limited in relation to legal security (36/100) and reputation (30/100), and weak in relation to human capital (24/100) and operational efficiency (27/100). The sector performs below the universe average on all assets except for legal security where the sector average (36/100) is higher than the universe average (32/100).
• The Financial Services General sector faces 241 controversies: for 3% of companies these controversies are critical, for 18% they are high, for 6% they are significant and for 1% they are minor. 72% of companies do not face any controversies. The most recurrent controversies relate to business ethics, internal controls and customer relations.
– Financial companies involved in investment or asset management activities have the responsibility to consider all long-term investment value drivers, including ESG issues, as a part of their fiduciary duty. Overall, the global industry’s average score on the integration of ESG issues in investment decisions has increased but remains weak (25.2), with European companies performing best on disclosure.
– The Financial Services General sector’s capacity to tackle climate change and support the transition to a low-carbon economy is weak (20/100). Financial companies bear ultimate responsibility for managing climate-related risks and opportunities on behalf of their clients and their own shareholders and support portfolio companies in the energy transition. European asset managers lead the sector in integrating carbon risk in the management of their assets but very few companies monitor the CO2 emissions associated to their investment portfolio.
– Since the financial crisis of 2008-2009, Financial Services companies have been involved in several conduct-related scandals. In light of these, compliance with regulation has become even more important for Financial Services companies. Findings reveal that the industry is still slow in improving and embedding responsible conduct and ethical culture (37/100).
– The industry’s level of transparency on efforts to address cybersecurity remains limited. This is despite the Financial Services sector being more vulnerable to cyberattack than any other industry, and the rate of breaches increasing significantly over the years. Among the companies reporting on efforts to address cybersecurity risks, the majority have only set up a few measures. The most common actions include disaster recovery and business continuity management plans, the appointment of a Chief Information Security Officer (CISO), awareness raising and employee training. The supervisory role of Boards on company cybersecurity strategies is an area to be developed further.
– New technology and organisational changes have significantly reshaped employment and working conditions within the industry. Work-related stress is reported to be at critical levels, posing a challenge to financial services firms. However, the industry’s ability to prevent and mitigate psychosocial risks remains weak (20.9/100).
Best performing areas:
o Board of Directors
o Internal controls & risk management
Worst performing areas:
o Social dialogue
o Responsible lobbying
Top Performing Companies:
o Europe: Amundi (68/100)
o North America: Goldman Sachs Group; Wheaton Precious Metals; Janus Henderson Group (46/100)
o Asia Pacific: Hong Kong Exchanges & Clearing (53/100)
o Emerging Markets: Fubon Financial Holdings (50/100)
Companies making best progress since 2017:
o Europe: Kommunalkredit Austria; Euronext; Eurazeo (+10)
o North America: Wheaton Precious Metals (+19)
o Asia Pacific: ORIX Corporation (+15)
o Emerging Markets: Fubon Financial Holdings (+22)
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ESG, Financial Services