The report, ‘ESG and Banking: A chance to rethink strategy, states that while there are already several purpose-driven banking organisations, like building societies or credit unions, and many large UK banks pursuing initiatives with a positive environmental or social impact, more can be done to set out practical initiatives to embed ESG into business and operating models.

PwC UK’s 24th Annual CEO Survey revealed that organisations are increasingly focusing on purpose and sustainability. This year, 70% of CEOs told PwC they were now concerned about climate change, compared with just 44% in 2019.

The ESG report has revealed that are already positive signs of change, with 60% of UK CEOs increasing their investment in sustainability and other ESG initiatives over the next three years. Around a third also noted that they should be doing more to report on their purpose and values, and their organisation’s impact on its wider communities.

PwC has said leaders should consider their level of ESG compliance ambition, overall and for each sub-element, against the expectations of those stakeholders who matter most to the long-term viability of their businesses.

How ambitious a bank is on ESG will determine whether they develop an ESG strategy that complements their existing corporate strategy, on the side, or develop a new, ESG-aligned corporate strategy.

The Big Four firm urged that banks should first make decisions based on organisational purpose and values, and set an ESG persona that reflects their ESG beliefs and commitment.

PwC added that executives with a low level of commitment may focus on minimum regulatory requirements, while those with a high level of belief in ESG principles may incorporate ESG actions fully into strategies and more fundamentally change their organisations.

Banks will need to be pragmatic in executing and rolling out initiatives, communicating timely progress and outcomes to stakeholders. While some initiatives will be more short-term focused, often driven by regulatory timelines, others may require a multi-year phased approach. Success will be influenced by the tone at the top of organisations and a ‘critical few’ behaviours that can enable a purpose-orientated culture.

PwC said that on reporting, more needs to be done to bridge the gap between historical ways of measuring performance and new, longer-term concepts coming with ESG.

The report concluded that executives should make an active choice on what their ambition is and how they are going to deliver on it.

It added that they must execute these changes and transform, rolling out chosen strategic initiatives backed by the support of strong leadership.

PwC said to ensure success, banks should set targets, and track and report these back to stakeholders. Those that perform best will be those that most closely align choices to ESG ambition, as this enables them to meet stakeholder needs while creating value.