Integrating ESG: moving to the next phase

Integrating ESG and purpose into our strategy has created an opportunity for ANZ to better serve our customers and generate long term shareholder value.

“We have a clear sense of purpose; a strong, values-led and people focused culture; and an integrated approach to ESG that is supporting the delivery of our strategy.”

It’s appropriate we hold ourselves to account publicly with regards to progress.

Over the past few years we have covered a lot of ground – in particular our governance structures, product suitability, remediation, climate change and social impact. Last year we focused supporting people, customers and the broader community through COVID.

• There is much we are proud of and many challenges ahead. Our current focuses include:
• our alignment of purpose and ESG with strategy and outcomes;
• how we drive value through our people and culture;
• where we are with environmental sustainability, both as a risk and an opportunity; and
• how we continue to strengthen our focus on financial wellbeing and how that will drive better outcomes for the community and for ANZ.

The banking sector has faced a challenging environment in recent times – through the Global Financial Crisis, the financial services inquiry, around 20 parliamentary inquiries and of course the Royal Commission. These moments have brought about the need for the banking sector to change.

At ANZ, we have embraced this opportunity and it is enabling us build a better bank, providing stronger outcomes for customers and a financially more sustainable business.

We’ve spent much of the last five years embedding our purpose, ethics and values into our strategy and the way we make decisions. We’ve also further strengthened our governance processes.

In 2016, we were the first large Australian bank to broaden the remit of our Governance Board Committee and establish a dedicated Environment, Social and Governance Committee.

Today we know this as our Ethics, Environment, Social and Governance Board Committee. We are still the only one of the big four banks in Australia to have this dedicated structure and it is having a material impact on the strategic decisions we make.

Continuous improvement

To keep improving, we recently undertook a benchmarking exercise looking at peer banks around the world and leading Australian corporates. It reaffirmed our practices are robust and broadly aligned with those peers considered to have good ESG governance.

But we do know this is a fast-changing space and we remain vigilant and connected to leaders in this area so that we can understand emerging trends and opportunities. For example, the emerging interest in biodiversity.

So how is our purpose and approach to ESG helping us deliver on our strategy, creating value for our customers and ultimately for our shareholders? A great example of this is the work we do to support customers in the sustainable finance market.

During the first three quarters of this financial year we participated in $91 billion of sustainable finance transactions across 55 deals in Australia, New Zealand and in our International business.

Many of these sustainability-linked transactions are firsts – such as our loans for retailers Coles and Kathmandu, a bond for Wesfarmers and a bond for Singaporean infrastructure development company Surbana Jurong.

These deals, and of course many others, highlight the enormous opportunity and the upside in supporting environmentally sustainable development.

ANZ’s strong proposition in this area, linking our ESG approach, focus on environmental sustainability and our leading regional footprint, is helping make us a clear leader.

Our strategy is unchanged and we remain focused on three areas:

• Helping people save for, buy and own a sustainable, liveable and affordable home
• Helping people to start or buy and sustainably grow their business
• Helping companies move goods and capital around the region

At the heart of our goal to build a better ANZ is a focus on building the financial wellbeing of our customers – whether retail, small business or institutional. We’ve developed some financial wellbeing principles to guide this work, such as spending less than you earn, saving for a rainy day, or investing in things that grow, to help our customers make better financial decisions for their future.

To deliver our goals we need to have:

• A purposeful, engaging and attractive Proposition – supported by the right products and services that meet our customers’ needs; along with safe, simple, and efficient systems and processes.
• As Australia’s leading provider of banking platform services to other financial institutions, we also need to invest more in flexible digital banking Platforms – extending our reach to other banks, fintechs and non-bank service providers to drive real economies of scale and enabling them to serve their customers well.
• Collaborative Partnerships that unlock value – connecting with fintechs and other partners like Worldline and through our own ventures and incubator business 1835i where we invest in and partner with leading innovators like Lendi and Airwallex.
• Relationships we have with our community partner organisations to deliver financial inclusion programs. And it’s the work we do to support not-for-profit partners to deliver more suitable housing opportunities in the market.
• Values-led People – and we recognise the need to attract and retain the best people who can deliver on our strategy.

Ultimately, it’s an amalgamation of everything we do and when the elements are added together and when we get them right, our customers will notice a difference, and we’ll deliver better outcomes for our stakeholders.

We’ve developed a range of metrics linking purpose and strategy together draw a line down to a suite of people, customer and brand metrics in our group scorecard, with both internal and external targets.

This ensures we have a clear set of goals and measurements to track our progress. It also provides key inputs into our people management systems, including remuneration.

Earlier this year we developed a new group-wide diversity and inclusion (D&I) strategy. We’ve had a D&I strategy for over 15 years now. However the new strategy was co-created with employees from all levels and geographies, including people from our employee networks. It’s also been endorsed by ANZ’s Executive Committee and the Human Resources Committee of the Board.

This year we introduced a new question in our annual ‘My Voice’ staff engagement survey asking if people feel like they belong at ANZ.  The overall score was 81 per cent – something I’m really proud of – as we know an inclusive culture is one of the most critical drivers of employee engagement.

Another area of focus is achieving gender-balance across the bank. We have a target to achieve 34.4 per cent of Women in Leadership by the end of financial year 2021 – and we’re currently sitting just above this at 34.8 per cent, which is terrific – and the fastest improvement we’ve seen in five years.

ANZ has signed up to Hesta’s 40:40 initiative and we are proud to be the only Australian bank amongst the first 10 signatories. Having women in executive roles, especially in ‘line’ roles with profit and loss accountability, is critical as this is from where the majority of CEO and CFO appointments are drawn.

Not only is my leadership team 40 per cent female but of the four line roles that sit on my leadership team, 50 per cent are held by women and this has strengthened our decision making and the way we consider and manage risk and opportunity.

I’m pleased with our progress in building a diverse leadership team at ANZ and I believe our bank is a place that grows and fosters great talent.

Another key part of our D&I focus relates to First Nations people and next month we will launch our fifth Reconciliation Action Plan (RAP).

The new RAP focuses on improved financial wellbeing, providing employment and career progression, building the capacity of Aboriginal and Torres Strait Islander businesses, and understanding the importance of cultural heritage. It has strong support among employees as well as the board and our executive committee.

In New Zealand, we appointed Karleen Everitt as our new Head of Te Ao Māori Strategy in February 2021 – to help ANZ play a stronger role in building economic participation for Māori people and increasing the cultural capabilities of ANZ.

Exciting opportunities

We are also working hard in environmental sustainability – helping drive sustainable outcomes for customers and the community. Our commitment is to support households, businesses and financial practices that improve environmental sustainability.

This is one of the most exciting opportunities for ANZ and we are well placed to shape and support the required economic transition.

Too many people consider our policies in this area in the negative – what we won’t do. While that has its place, we are focused on what we can and will do to finance the transition required across the region.

Our environmental sustainability strategy is supported by our climate policies and programs. For instance, our climate change policy – which we update regularly – sets out how we think about and respond to both the risks and opportunities.

It outlines our policies in relation to thermal coal exposures for example, along with our own operational emissions targets. But it also focuses on the important work we do with our large, institutional customers to help them make the transition. This work is going well and we continue to see their plans advancing.

What’s also really exciting us and what’s driving our future focus are the significant transition opportunities coming from a low-carbon economy.

Our sustainable finance team is leading the way in serving customers in this area. So far this year we have transacted what previously has taken us five years. And we are also outpacing global growth with our market share growing significantly.

Sustainability trends in the economy more broadly are also presenting us with commercial investment opportunities which we are actively pursuing.

Key areas of interest for us include support for electrification of the transport supply chain, facilitating new technologies, commercialisation of hydrogen, financing energy efficient buildings, and assisting customers establish and develop their own transition plans.

To succeed in this area we will be investing in our business – in developing our people to have the right culture and mindset committed to environmental sustainability; in building out our climate risk expertise; in having better data and technology to develop insights and track emissions and in strengthening our industry knowledge and product expertise.

We’re committed to delivering on our goal to be a leading environmental sustainability bank – seeking out business opportunities that are aligned with our purpose and our strategy. We don’t want to just be a bank who does sustainability well – but rather a sustainability-led bank.

Digital growth

One of the ways we are working to improve the financial wellbeing of our customers is giving them tools and insights that can help positively change their behaviour.

We know customers with a savings goal have a savings balance twice that of a customer without one. And they save nearly two times faster than they did before setting the goal.

Through the ANZ App, we are helping our customers save through insights, nudges and goals. This is exciting because when they set goals, customers are sharing with us what’s important to them – saving for a house, holiday, car, pet or to start a small business.

By ethically and responsibly using this insight we are better placed to coach and advise our customers on how they can get there faster.

ANZ has a clear sense of purpose; a strong, values-led and people-focused culture and an integrated approach to ESG that is supporting the delivery of our strategy. And in the area of environmental sustainability in particular, there is a huge business opportunity for us if we can get it right.

Shayne Elliott is CEO of at ANZ

This article has been adapted from Shayne Elliott’s opening speech at ANZ ESG Briefing. You can read his full speech here.