1. Lead from the top

It is important to establish the CEO as the leader on sustainability topics. The head of sustainability should report directly to the CEO. This provides the head of sustainability with the mandate necessary for fast-track implementation, while the CEO remains responsible for ensuring that sustainability objectives are met or being progressed.

A CEO-chaired, business-wide steering committee allows for oversight and regular engagement on sustainability activities to ensure that key milestones are reviewed and met. A short weekly meeting, coordinated by an experienced project manager, can be effective to ensure that there is regular business-wide engagement and oversight on sustainability matters. 

2. Identify gaps and establish a project plan

To make progress towards sustainability objectives, it’s important to first understand the baseline, identify the gaps that exist and make a project plan to meet them. The project plan should assign responsibility for tasks and clearly define who is accountable for them. 

Among the potential workstreams that could contribute to a project plan are the following:

• beliefs and policy
• sustainability data
• regulation
• investment decisions
• security-level exclusions, such as coal
• stakeholder groups, such as PRI or IIGCC
• education
• client training
• reporting and disclosure

It is important for the head of sustainability to provide the expertise and technical oversight – but not necessarily to assume responsibility for all of the actions arising under the project plan. To be effective, it is important to embed sustainability across the business, so that it becomes part of ‘business as usual’. This means that all teams will be responsible for delivering on sustainability-related objectives, including those that do not have ’sustainability’ in their team name or job title.

Ultimately, there will be collective responsibility for achieving sustainability aims, rather than responsibility resting solely with the sustainability function.

3. Ensure business-wide involvement

To ensure sustainability is embedded across the organisation, an organisation may consider establishing ‘sustainability champions’ in relevant teams. From experience, there may be more candidates than roles, given genuine employee interest in sustainability and a desire to help with delivery against long term aims.

The champions may then be assigned tasks within the project plan. To underpin delivery, these should also form part of the champions’ objectives and performance review. Not only will this ensure progress against actions, but it can also be an opportunity for the champions to demonstrate the company’s values and desired behaviours.

The project manager can speak with each champion, and their manager as necessary, to check progress and ensure their sustainability tasks are adequately resourced. Each task should be sponsored by a member of the management team who is responsible for overseeing the work.

The champions may then be supported by organising training sessions on a range of topics. These could be simple short teach-in style sessions run by colleagues in the organisation with relevant knowledge and expertise, but equally may be more formal.

Firms may, for instance, consider inviting speakers, such as PRI, IIGCC or human rights NGOs to host a session. A reading list, as well suggested podcasts and films could also be useful tools to enhance individual knowledge. Maintenance of a list of resources could be managed by one of the champions with a regular request for new relevant content which is then shared with other champions and interested parties.

Examples of useful sustainability content could include:

• How to Avoid a Climate Disaster, by Bill Gates
• Just Business: Multinational Corporations and Human Rights, by John Gerard Ruggie
• Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, by Kate Raworth
• Impact: Reshaping capitalism to drive real change, by Sir Ronald Cohen
• The Truth about Modern Slavery,by Emily Kenway
• Making the Financial System Sustainable, Edited by Paul G. Fisher

Most companies have periodic ‘all-staff’ calls or meetings, which are often an important vehicle for senior leadership to communicate and engage on a firm-wide basis. Ensuring that sustainability is a frequent agenda item can help to drive business-wide commitment and involvement and encourage staff to be part of the journey.  

4. Establish sustainability beliefs and policies

Establishing sustainable investment beliefs (‘the why’) and sustainable investment policies (’the how’) will help link the firm’s sustainability agenda with its business objectives.

In my experience, it is important to first review the evidence base on financial materiality. More studies than not show that incorporating ESG issues into investment decision-making and excluding certain companies or economic activities with unmanaged ESG risks, at worst leads to comparable results but at best, leads to superior risk-adjusted return.

The firm may also wish to review terminology and approach. For instance, what is the firm’s approach to ’real world sustainability impact’ or ’double materiality’? To define what is meant by key terms, such as ‘sustainability’ or ‘stewardship’, a firm may wish to refer to definitions from the United Nations Brundtland Commission and the UK Financial Reporting Council.

To support the development of beliefs, a firm may find it useful to organise internal workshops, as well as discussions – and perhaps training sessions – with clients, to explain what is meant by sustainability, the rationale for the firm’s approach and the implications for investment decisions.

In Cardano’s experience, our investment decisions followed our beliefs and policy. We increased our investments in green, social and sustainable bonds, invested in low-carbon ESG-screened equity, and some months earlier, we invested in base metals necessary to support the energy transition. We also began a project to invest in social housing.

Finally, to demonstrate beliefs, a firm could consider making a commitment to decarbonise its portfolios, and joining the relevant GFANZ alliance for its sector.

6. Set out your approach to real world sustainability impact

Investors increasingly commit to ‘double-materiality’ and want to incorporate both ESG integration and real-world sustainability impact into their investment processes. However, there is little clarity as to what is meant by ‘influence’, ‘real-world sustainability impact’, and how to measure it.

At Cardano we developed our own ‘model of influence’. This comprises 3 key forms of influence, based on how direct an impact these actions may have. We have worked with our investment teams to develop our influence across all 3 tiers when building portfolios, with the aim of maximising our influence to achieve real-world sustainability impact.

One important vehicle for high impact influence is collaborative stewardship. We partnered with a stewardship provider to enhance our stewardship activities. We select companies based on our holdings, our priority issues and our ability to contribute to the engagement. As head of sustainability, I lead our enhanced stewardship activities, supported by colleagues across our investment, client and advisory teams.

7. Where there is already sustainability expertise, step aside

Undoubtedly, there is more work to do than people to do it. So, where there is already expertise, step aside. For example, before I joined, our manager research team had integrated sustainability into third-party manager assessment processes. While this was an area of interest for me personally, progress was well underway. So, as head of sustainability, I joined meetings on an ‘as needed’ basis, freeing time for where I could have more direct input.

8. Report

There should be regular reporting to a wide range of stakeholders both internally and externally. This includes regulators, clients and stakeholder groups, among others.

Cardano undertakes a range of reporting activities: reporting to clients; public reporting on our website; a partnership with Pensions Expert (where we empowered champions to author articles on sustainability topics relevant to their roles); an end of year sustainability report.

We also run a series of events. This included an event about COP26, with a spokesperson from the PRI, and an event on stewardship with a spokesperson from the FRC. We also organised client events on topics such as inequality, gender equality and impact investing.

9. Innovate and change

To drive the long-term sustainability agenda, consider change and explore innovative opportunities.  As an example, in January 2022, Cardano acquired ACTIAM, a firm with extensive experience focused on social foundations and planetary boundaries. Through the course of 2022, we’ve integrated our sustainability staff and our policies.

10. Invest in relationships

Sustainability can be exclusive. Terminology changes and expectations evolve. There are new groups, new requirements and new reporting needed. These are all barriers that need to be addressed. It is the head of sustainability’s role to consider them, take responsibility for them or to assign the tasks to others. The head of sustainability should seek to earn the respect of colleagues, by providing expertise, technical support, coaching and training, and challenging the views of others while giving them the opportunity to speak up and provide their own views for a richer dialogue.

Final words

This article speaks to the role of the chief sustainability officer. But however smart or hard-working the sustainability officer, progress against the firm’s strategic sustainability agenda relies on organisation-wide contributions as well as clear leadership and commitment from the organisation’s management team.

I’m often asked for my views on what to study or read: ‘What about the CFA sustainability qualifications?’ ‘What about the Oxford or Cambridge sustainability course?’

Studies are of course important. But in my view, the most important characteristic is passion. To be successful as a head of sustainability, the starting point has to be passion to change markets, economies and societies to be more sustainable – to make the world a better place – and a belief that investment is a key conduit to achieve that change.