REVIEW OF FINANCIAL MARKETS
these attributes in practice.
TABLE 2: FINDINGS AT THE PLANNING STAGE OF THE PROPOSED ACTIVE MINDSET MODEL
Task-related attributes
Respond to opportunity and threat
Examples
• Take an entrepreneurial approach to investing/ lending
• Proactively engage with customers to identify demand for climate-related products/services
• Provide small- and medium-sized business customers with relevant climate-related information
Make strategic investments to develop new capabilities
• Recruit new staff with climate skills • Upskill existing staff • Directors invest in own training
directors expressed disinterest in peers’ responses, with one viewing competitor analysis as only informing “about intent”, evoking the spectre of ‘greenwashing’ or rhetoric over substance. However, banking is a highly competitive business, and despite this professed indifference, directors appeared well informed about peers’ approaches. For example, a commercial bank chair remarked on the “superficial response” of competitors reacting to non-governmental organisation pressure to exit thermal coal, but still lending to oil and gas, “so not understanding why they need to exit thermal coal”. Reflecting the high degree of competition around product innovation, one director commented: “we’re pushing into it as hard as we can and assuming it will probably get us ahead of the pack”, aware that any strategic advantage a bank has with a product is short-lived before imitators jump in as “we’re the greatest copycats in the universe”. There did appear to be a more
collaborative approach taken to other aspects of climate response, scenario analysis of climate-related risks specifically, with one director commenting that “all banks are on the same journey and cannot benchmark themselves against peers yet … I think we’re all helping each other, as opposed to anybody is in the lead”, supporting the call for collaboration noted by CISL (2020). Several directors expressed
awareness of the threat to personal reputation from either an inadequate or extreme climate response, reflecting the delicate balancing act of keeping
CISI.ORG/REVIEW
different stakeholder groups happy. Climate response is “really part of the overall image that you want to present to the world”, illustrating the importance to one director of personal reputation. A more covert approach (“we don’t walk around with a banner” – advertising the bank’s support for a carbon price) to avoid alienating certain stakeholders and negatively impacting reputation contrasts with the behaviour of taking responsibility identified in my previous article, ‘Developing an active mindset model to help address climate change’ (
cisi.org/rofm-feb22), as an active mindset behaviour. Self- reflection, to ensure authentic alignment of beliefs with actions, as advocated by Argyris and Schön (1974), and increasing perceived self-efficacy (Forbes, 2005) could increase emotional capital (Andrade, 2015) and improve practice. The current level of awareness expressed in the interviews supports Rickards et al.’s (2014) finding that what is lacking in leaders’ climate response is self- knowledge.
THE PLANNING STAGE It is not enough to gather information. There needs to be an understanding of the need “to use the signals you have picked up, to challenge the status quo”, one director urged, supporting Teece, Raspin and Cox (2020) who stress the need for action in dynamic capabilities. Table 2 shows the task-related
attributes of planning that exist in the directors’ accounts and examples of
Responding to opportunities and threats Although several directors identified technology and leveraging frontline bankers as opportunities in the transition to a low-carbon economy, accounts differed over how these would be realised. Responses appeared to be on a continuum. At one end: “it’s not the bank’s role to give away money to climate initiatives … the first job is to protect the [lending] book, rather than innovate”; through: “you’ve got to do it all” and that banks that “grasp the nettle” and lend broadly will “be winners”; to the other end of the continuum, where a director spoke of a radical transformation of the mortgage portfolio and reorganising the bank entirely around data. This latter view supports Teece et al.’s (2020) observation that entrepreneurial, transformational thinking is a vital part of dynamic capabilities. I would argue it also suggests high perceived self- efficacy. Similarly, directors described
// ALL BANKS ARE ON THE SAME JOURNEY AND CANNOT BENCHMARK THEMSELVES AGAINST PEERS YET. WE’RE ALL HELPING EACH OTHER //
differing approaches to deepening relationships with customers, seemingly reflecting differing levels of entrepreneurial thinking (Teece et al., 2020) and varying degrees of perceived self-efficacy (Bandura, 1997; Forbes, 2005). The director of a commercial bank said the bank would only invest in infrastructure to support a new product once there was significant demand. This contrasted with the more proactive approach described by the chair of an investment bank who spoke of
frontline bankers engaging with customers to “get a sniff of whether there’s demand and say: ‘maybe if we come up with a product, we can satisfy that demand’”. The opportunity of better servicing
small and medium business enterprise customers, who are resource-restricted,
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