–> This is a pre-event interview in the run-up to the Leaders in Sustainable Finance Event on 26 January 2023
Jeroen: Let’s get started. First of all, Jaap, thanks for taking the time to talk to Leaders in Finance. What I’d like to do first is get to know you. It would be great if you could introduce yourself, that would be great.
Jaap: Sure! My name is Jaap Gerkes. I’m a managing director at Protiviti in Amsterdam. I have 25 years of experience in external audit, internal audit, risk management, compliance and internal controls. Since about two years, I’ve been responsible for ESG in the Dutch practice and I am also part of the global group of experts when it comes to ESG. I have a background outside of the financial sector, although I get a lot of work inside the financial service industry as well. That also makes ESG quite an interesting topic because those are two quite distinct angles that lead to different challenges.
Jeroen: What makes it for you personally interesting, this area of ESG’s?
Jaap: What I like about it personally is the increasing interest in ESG-related topics and I like to add it’s not only the E, but the S and the G are equally important. That can help in achieving a better world and large corporations can play a big role and should play a big role. What you see is that companies see it as strategic efforts, i.e. with or without regulation, just something that they feel is important for themselves to to all stakeholders, including shareholders, employees, customers, et cetera.
Jeroen: Is the role that the financial service industry has to play a big one in your view? Is it important?
Jaap: I think it’s a very big role. At the end of the day, the main focus on the objective of sustainable finance is to shift from traditional, commercial, sometimes dirty industries to green and sustainable industries and activities. And therefore, there is a huge role and potential for the financial service industry to make that shift of capital flows. And it’s going to make a huge impact on the ground.
Jeroen: Before moving on, I’m just thinking of one thing you mentioned before, which is the S and the G are as important as the E. Is the reason that a lot of the attention often goes – at least in my view – to the E because it’s a lot easier to measure?
Jaap: I’m not sure if it’s easier to measure. But of course, especially climate change, because within the E-domain, climate change is getting 90% of the attention rather than biodiversity and many of the other topics. Don’t get me wrong, it is a very important topic. And it’s also something where companies can really show to the outside world what they’re doing to face these kinds of climate challenges. The S sometimes is a bit more hidden. Looking for instance at things that are now developing in the supply chains, i.e. how do you make sure that if we source goods from countries where they have a different way of looking at human rights or child labour et cetera, or health and safety, how that can impact organizations.
Jeroen: What would you say is the biggest challenge the financial services industry is facing?
Jaap: The financial services companies already have done a lot around ESG, especially on the E, in their investment decisions, in assessing credit risk and other risks. A number of things spring to mind. In the first place, the general public and society as a whole may expect from finance institutions that they invest wisely when it comes to the impact on Environmental, Social, of Governance issues. Which may or may not be what they’re currently used to.
Next to that, there will be a lot of additional regulations coming in. Regulation around reporting, regulation about the way financial services industry companies measure risk related to ESG-related topics, et cetera. I think on the one hand, it’s very good that these regulations are coming up, especially when it comes to reporting. It makes the market transparent, i.e. much more comparable between organizations. But at the same time, many large companies have the tendency that if something is heavily regulated, you only look at topics from a regulatory lens.
Thirdly, it will be important to stick to your strategy, stick to who you are, who you want to be and to focus on that as well.
Finally, big data is fragmented, financial institutions need to make sense of all the data they own. New tools and technologies need to be installed, developed and utilized to the full potential.
I would say the aforementioned are a number of challenges that come to mind when you ask me this question.
Jeroen: Thank you, that makes total sense. On your first point, which I will summarize as ‘invest wisely’, do you mean with that, that you’re not taking too much risk? Is it the risk point? Or did you mean something else?
Jaap: Indeed, I think it’s from a perspective of the risk for the financial institution. What kinds of assets do we have? What kinds of investments do we have and what is the risk from an ESG-perspective for us as a financial institution? But also, are we investing in areas that are sustainable for society as a whole?
Jeroen: From an opportunity perspective, where do you see opportunities for financial services firms or organizations?
Jaap: A big opportunity is that when regulation is moving on, the reporting of all organizations – looking at CSRD, that’s around 50,000 organizations within Europe that need to comply – makes it way easier to compare companies from a sustainability or ESG perspective. And I think that’s an opportunity, because currently a lot of these kinds of ESG reports are looking very fancy but it’s always difficult to see what’s behind that in terms of data quality, in terms of reporting rigor, setting, and changing objectives, et cetera. And I think that’s an opportunity because it makes it much easier when you are investing in a certain area to really have comparative data and really know what you’re into.
Jeroen: The last question, I hope and I want to assume that you’re looking forward to the event?
Jaap: Absolutely! What I’m looking forward to is that this is an interesting audience that you have put together as a line-up in the conference. A lot of discussion and not only just people from the financial service industry themselves sharing experience, but also people from the industry, people from NGOs and representatives from government organizations. So it will be a very diverse group of people being able to address ESG from various angles. And I think that will lead to a great experience and it’s also fantastic to meet people in person of course.
Jeroen: Thanks to you and we are looking forward to meet you in person there. Thank you so much for taking the time!
—> Jaap Gerkes is MD at Protiviti and is a partner of the Leaders in Sustainable Finance Event that takes place on 26 January 2023.