When it comes to ESG & Impact Investing, credit unions are well-positioned to use both to differentiate themselves from other financial institutions. By providing innovative product opportunities for existing members and attracting new members that are seeking to integrate social considerations in investment decisions, credit unions can easily strengthen the link to their mission & spearhead the mainstreaming of Impact Investing and, to a larger extent, ESG.
Today, ESG has progressed from a nice-to-have investment class “fad” to a front-page headline of a must-have sustainable investment process – one that consciously and conscientiously thinks about a company’s long-term impact on the environment & society as much as the organization’s business performance. These principles of social responsibility, financial inclusion, and community commitment are, in fact, reflected in credit unions’ missions, strategies, and product offerings, making ESG a natural and seamless fit for these cooperative, member-owned financial institutions.
An ESG approach means credit unions explicitly consider both environmental risk mitigation and ways to maximize environment/climate-related opportunities in their strategies, planning, and metrics. Unsurprisingly, the opportunities for credit unions around adopting an ESG approach are vast:
It is evident that credit unions are in the perfect space to adopt ESG guidelines that will accurately and transparently benchmark, measure, and evaluate their ESG performance. There are many tools and platforms out there today that consolidate these guidelines and present them in a digestible manner; ESGTree is one such platform that takes data consolidation & trends analysis to the next level by offering a one-stop-cloud-based solution that collects, analyzes, and reports ESG data seamlessly. This solution may come in handy for credit unions, who very well know that sound performance on ESG-related measures translates into better financial returns.
Despite credit unions’ ethos around community, sustainability, and inclusion, many treat Corporate Social Responsibility (CSR) as a tactical secondary activity; nearly 20% of credit unions provide no focus area for corporate giving and, generally, report being less than satisfied with their Impact report tracking record. If credit unions made a concerted effort to formalize the ESG opportunities outlined above and conjoined it with defined Impact Initiatives, they could become the quintessence of sustainable finance.
Specifically, credit unions have an opportunity to lead the development of the retail impact investment market in ways that other financial institutions do not. Like with ESG, the prospects here for credit unions are immeasurable:
Despite the significant appetite for Impact Investing, there are daunting barriers to greater adoption. One is the lack of standardisation in measuring the ‘impact’ of investments. Investors are struggling to quantify the environmental impact of their investments – 61% of them state that this cause is difficult to measure because of the vast array of impacts and a lack of commonality. Currently, the 17 Sustainable Development Goals (SDGs) are the most commonly used impact performance measurement tools, where investors assign impact to one or more of the goals, such as climate action or gender equality. This Tool has been synthesized and automatized by ESGTree, whose Platform contains an Impact Measurement feature that has improved and refined the way that capital is allocated, and returns are measured.
As solutions like ESGTree lower the obstacles to the adoption of ESG & Impact, credit unions can seamlessly use ESG & Impact to deepen financial well-being for all and advance the communities they serve – the opportunities here are endless.
Click here to learn more about ESGTree’s ESG Data Management & Reporting Software for Financial Institutions