Corporate and investment banks are chasing a share of the $3.5 trillion annual transition financing need, but they have overlooked a critical factor: investing in the climate and sustainability skills and capabilities of their frontline teams. These teams play a pivotal role in engaging clients on their transition plans and identifying the right sustainable finance and transition financing solutions. Client-facing teams need up-to-date knowledge and the required expertise on decarbonisation trends and drivers in their clients' sectors, as well as practical insights on how to engage them on sustainable finance and transition financing opportunities.
There are three key reasons why corporate and investment bank leaders should urgently prioritise investment into building their frontline climate and sustainability capabilities.
Your clients are expecting your teams to have the right expertise
Training programmes have typically focused on building foundational capabilities across the ‘all staff’ population or enabling staff to manage the firms’ climate risk exposure in response to regulation. With the bases covered, the focus must now evolve to evaluating clients’ transition plans and using data and insights to engage clients on the right sustainable finance solutions. The shift in focus from risk management to opportunity sizing means that there are new training needs, particularly for frontline teams. Neglecting investment into your frontline’s climate and sustainability capability can damage your bank’s reputation, climate strategy and prevent you from realising commercial opportunities arising from a shift to a low-carbon economy. We recommend this sort of training happens regularly on at least an annual basis and is most effectively delivered through practical, workshop-style training that brings real-life client case studies to inform better quality, more frequent conversations.
Investing now can enable a more resilient and credible long-term strategy
The financial services industry is moving towards Transition Plan Taskforce-aligned strategies and many banks are in the process of undertaking scenario analysis to understand the most likely path of transition. Developing long-term strategies is integral to the transition, however, immediate action is required in parallel. To achieve the targets that form the basis of these strategies, employees in client-facing positions need a detailed understanding of transition technologies in their sector and innovative financing solutions that balance the risk/return of these investments. Arming employees with the knowledge to have insightful conversations and assess the credibility of the opportunities will also generate a feedback loop whereby they are able to assess the real-world opportunity and test the achievability of the strategic targets. This is why role-specific, opportunity focused training is no-regrets work that can be run in parallel with finalising long-term decarbonisation strategies.
Time is of the essence
In recent years, banks set increasingly competitive sustainable finance and transition financing targets. Whilst achieving these will partly be achieved through the anticipated 20-25% CAGR sustainable finance market growth1 through to 2032, most banks will need to gain market share quickly to credibly achieve their targets. Frontline teams therefore need to be equipped to provide a market-leading service to clients through deep climate and sustainability knowledge that is maintained and refreshed regularly. To maintain this knowledge base, we recommend hosting monthly sector and regional-specific sessions focused on the climate and sustainability policy environment, climate events and decarbonisation opportunities that can provide ‘triggers’ for client conversations. There is an opportunity now to position yourself as your clients’ transition partner of choice, through developing a differentiated offering on climate and sustainability. However, the challenge is to realise this opportunity in a market that is rapidly maturing and so to avoid playing catch-up, your frontline staff must develop the required skillset now.
For more information on how Baringa can support you to build your climate capabilities, please contact Michael Elter.
1GMI, Sustainable Finance Market Size, Jul 2023, available at https://www.gminsights.com/industry-analysis/sustainable-finance-market
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