In recent years public concern on ESG issues grew as the global pandemic shed light on the social aspects of the ESG such as racial injustice, diversity, inequality, employee retention, mental health concerns, that need to be addressed with utmost urgency. As a result, financial institutions are making meaningful efforts to tackle some of these pressing social issues. Many organizations are setting aspiring social goals and responding quickly to stakeholders’ and regulators’ demands to stay ahead of competitors doing similar work. Some of the social sustainability trends seen during the pandemic in the finance sector are highlighted in this article.
Recognizing the significance of Diversity and Inclusion at workplace
The significance of diversity and inclusion was reinforced during the pandemic after the dreadful incidents of anti-Black racism, i.e., the murder of Minneapolis resident George Floyd by a white police officer during May 2020. The upheavals impelled companies and their leaders to acknowledge the existence of systematic barriers that affect the lives of Black, Indigenous, and People of Colour (BIPOC). Many financial institutions are now tackling the issue by creating extensive diversity and inclusion plans.
Many of the top financial institutions such as TD, BMO, RBC, Scotiabank, CIBC, Sun Life Insurance, MetLife, are all setting specific, time-bound goals to increase the diversity in leadership roles among women and under-represented communities and increase investment in leadership programs focusing on developing BIPOC talent. For example, Sun Life Insurance set an ambitious target of improving the representation of women in senior management to 50% globally by 2025. BMO has come up with “Zero Barriers to Inclusion 2025” strategy to increase workforce diversity and inclusion by emphasizing “equity, equality and inclusion”1. For instance, they set a target to double the size of their Indigenous Banking business by 2025 and improve access to capital, education and partnership opportunities for black-owned businesses2. RBC is taking several initiatives including, Indigenous Peoples Development program, a two-year rotational program for graduates to help them develop relevant skills required for work and opportunities to expand their network to build their professional career3. Many financial institutions are also addressing systemic racism by launching mandatory anti-racism and cultural awareness training for all employees.
Addressing Mental Health Issues
The Covid-19 pandemic gave rise to mental health issues, which is a leading cause of disability in Canada that prevents nearly half a million Canadians from attending work each week4. Many financial institutions invested in creating or expanding mental health programs. Some examples include Sun Life Insurance’s free app that connects users with healthcare professionals, virtual health care solutions, free 24/7 access to third-party confidential advice for employees, provide employees with paid wellness days and flexible work options to step away from the stresses of work during these unprecedented times5. TD Bank also offers various resources to support their employees with their mental well-being, including online assessments, podcasts, educational training, webinars, and increases to mental health coverage in the medical plan6.
Increased Support for Seniors
Pandemic had a significant impact on senior citizens. They were unable to visit banks due to restrictions and to remain cautious from the spread of Covid-19 which is deemed to be riskier for older aged people. This made it difficult for senior citizens to manage their financial needs. The initiative taken by CIBC helped Senior Citizens deal with this crisis as employees proactively called 400,000 seniors and offered support. For instance, CIBC employees assisted with online and mobile banking options to ensure seniors manage their finance without feeling disconnected while staying safe at home7.
Focus moves to Employee Recognition and Retention
Many institutional investors are calling on companies to ensure employee recognition and retention. This has further initiated firms to help their employees manage extra costs and financial challenges caused by the pandemic by extending paid emergency leave and covering some home office expenses to support working from home. One of the worries faced by employees during the pandemic included job security. TD Bank supported their employees by announcing that there would be no job losses as a result of the pandemic in 2020.
Fostering financial inclusion and financial stability
Many people face financial instability due to a lack of financial knowledge. For instance, about 1 in 6 Canadians (17%) have monthly spending that exceeds their income, while 1 in 4 (27%) borrow to buy food or pay for daily expenses because they run short of money8. Consumers also lack knowledge when it comes to borrowing. They often borrow through the use of a payday loan without realizing that it is the most expensive way of borrowing9. Many large financial institutions are focusing on providing financial literacy programs for youth, adults, small business owners, employees, and clients to address some of these issues that are caused due to a lack of knowledge and access to resources. For example, CIBC set a target to engage 200,000 clients in financial education through various events between 2019-2021 and achieved 69% of their target by 2020 already. TD created new websites through which women can get access to advice and helpful resources to meet their financial goals and become successful entrepreneurs. Sun Life Insurance is also educating its clients and community members on the importance of insurance, savings, and investments through the use of social media and by expanding financial education campaigns.
Many financial institutions are also placing an emphasis on increasing access to resources that will financially empower underserved communities. Sun Life and MetLife provide affordable insurance and targeted products for the underserved and low-income people around the world. MetLife recently partnered with local financial institutions in countries such as Nepal and Columbia where they have limited or no access to insurance products. TD Bank also helps their low-income customers with affordable products and services including low fee chequing accounts, ATMs in low-income areas and opens personal accounts for people regardless of their employment status. TD Bank supports organizations that provide microfinance loans to small businesses that do not have access to capital or a bank.
Why firms should continue to focus on social sustainability
Stakeholders are increasingly looking for companies to tackle social issues, create inclusive societies and expand opportunities for all people and failure to respond effectively can have a negative impact on the company’s reputation and may even jeopardize their social licence to operate10. There is evidence that addressing environmental or social issues does not hamper financial performance and by being proactive on ESG issues, firms can deliver successful financial outcomes while helping solve some of the world’s most pressing matters. Much of the innovation that takes place today transpires within the context of companies and they will continue to play a vital role in finding solutions to many of today’s problems11. As a result, financial institutions’ emphasis on social sustainability efforts can unravel new markets and products, retain and attract business partners and employees, and provide an opportunity to improve productivity and risk management and help avoid conflict with communities where they operate12.