Financial services and climate change: A duty of…what?

Dr Sarah Ivory
Senior Lecturer, Executive Education - Climate Change and Business Strategy
University of Edinburgh

In my recent keynote address to the SFE Journey to Net Zero summit I asked: what is the purpose of financial services?

For each company in this sector, the answer to that question will determine whether and how they progress on the journey to net zero. It will drive what they do, how they do it, and how they are judged for it. It will also determine how hard it is for individuals who are responsible for climate change within these companies to get traction for change.

I went on to propose a focus on two different duties that I would like the financial services sector as a whole to embrace: a duty of care and a duty of hope.

Duty of Care

The concept of a Duty of Care comes from the medical profession. It refers to the obligation placed on people to act towards others in a certain way and in accordance with certain standards.

The FCA talk about a duty of care in financial services in relation to customers: no conflict of interest, no profit at the expense of the customer, confidentiality etc. Given the financial services industry needs to do more to build trust with the wider public, commit to strategies which share wealth with marginalised communities, and prevent further escalation of global crises like climate change, perhaps it is time we proactively extend the duty of care more widely.

While views about the responsibility of investors for future generations vary, Tony Burdon from Make My Money Matter, recently said at the Work and Pensions Select Committee that “we currently have a pension system whose investments are destroying the very retirement of people who are saving into those schemes” (Burdon, 2024). Some may argue that the situation is more complex, but this point does shift the focus from not only whether the pension system is exhibiting a duty of care to global society, but even to the interests of their very own customers.

Duty of Hope

The concept of a Duty of Hope was used to underpin the northern Irish peace process. It describes as having a ‘moral duty to act as if the worst will not happen, and that in so doing, you just may prevent it’ (Farrell, 2018). Negotiators for the peace process were encouraged to enter the room every day with a Duty of Hope, that a solution could be reached.

Imagine if financial services companies, and the people within them, woke up every morning with a Duty of Hope that despite competing expectations, demands of shareholders, uncertainty coming from governments and regulators, and data gaps which persist, they believed that financial services could and would use its strength to address the climate crisis?

 I love this characterisation from Irish writer Maria Farrell (2018):

‘Hope is not a feeling, and it’s not a dream. Hope is a muscle. It gets stronger the more you work it.’

I would add that working that muscle can be incredibly satisfying. When we embrace the Duty of Hope we don’t let ourselves get shut down by fear. We let ourselves get opened up by joy, by community, and by professional satisfaction in what we are doing.

That doesn’t mean we can fix climate change and achieve net zero. Alone. Or even in our teams. Or even with a whole organisational push for the next year. But it does mean that we understand, accept, and embrace our cog in the machine that is driven by that Duty of Hope.

Consider the Wright brothers in Kitty Hawk, North Carolina when they achieved the first powered flight in human history. The year was 1903 and the flight lasted 12 seconds. Before that moment, humans had tried to achieve this feat for thousands of years, and failed.

Can you guess when the first commercial flight, where passengers paid for tickets, took place?

1914. Around a decade later, a 23-minute flight over Tampa Bay Florida was on sale.

What about the first supersonic flight?

1947. 45 years after our first ever flight, humans flew faster than the speed of sound.

And the first flight to the moon?

1969. 65 years after the first even human flight, we went to the moon.

Do you think the Wright brothers looked up at the moon and genuinely thought that THEY would personally fly there? Probably not. But they focused on their bit. They solved their part of the problem. And it was hard: they failed a lot before that day. But they had a Duty of Hope that despite all their failures they WOULD solve their part of the problem. And when they did, I like to think that they imagined the people who would one day build on that, and fly to the moon.

Some have described climate change as the greatest collective action problem ever, and perhaps it is. But I would rather reframe it at the greatest collective action opportunity ever. It is the opportunity to leverage the capitalist system, which is inordinately good at incentivising and thereby restructuring society, to build things better, differently, and fairer. Of course, that is hard and challenging and will throw up obstacles and give rise to naysayers. All change management does. The thing that I hope guides us through this in the financial services industry especially is a wider sense of our Duty of Care, an innate acceptance of our Duty of Hope, and ultimately experiencing joy and professional satisfaction in what we do and the change we contribute to.

References:

Burdon, Tony. (2024). Fiduciary duties: Work and Pensions Committee to examine duties of pension scheme trustees and approach to climate risk.

Farrell, Maria. (2018). Even at the End of the World, There’s Still a Duty of Hope.