- PwC’s US head Tim Ryan said at Davos that he expects American companies to increasingly take climate change as a serious threat over the next year.
- He said that US banks are leading the way in terms of building momentum.
- Ryan attributed this to the banks being excellent assessors of risk, as well as being in a position where they can comfortably invest in sustainability initiatives, relative to global competitors.
- PwC has signed on to the World Economic Forum’s plan for adopting industry-spanning sustainability metrics, a plan that is coordinated by Bank of America CEO Brian Moynihan.
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DAVOS, Switzerland – Tim Ryan, PwC’s US chairman and senior partner, has been to the last four World Economic Forum meetings in Davos, Switzerland, and it’s led him to notice a pattern: An issue will emerge among the executives in attendance and provoke conversation, and the following year it will be the predominant theme; by the next year, it won’t have to be discussed as much, because it had already solidly become a mainstream policy for all companies represented. Last year it was upskilling – investing in internal job retraining – and this year it’s investing in climate-related sustainability initiatives.
And leading the way are American banks, Ryan told Business Insider in Davos this week. “Why? Because the banks are really good at understanding risk. Notice I didn’t say perfect. Nobody’s perfect. But I think the banks understand risk, and they see the real risk of not getting this right.”
These banks are also best positioned to take charge on the issue, given their exceptional performance since recovering from the financial crisis and reining in risk. “So I think that then gives them the ability now to say, ‘Can we go lead on this issue in a way that really can have impact, and over a long period of time?'”
A changed conversation
PwC released its annual Global CEO Survey, which included responses from 1,581 chief executives from around the world, and “climate change and environmental damage” was not one of the top 10 perceived threats from North American CEOs.
Ryan said he expects that to change in next year’s survey because he’s been seeing momentum in the US, with banks as a bellwether. Not only have Citigroup and Goldman Sachs significantly expanded their impact investing offerings, for example, but Bank of America CEO Brian Moynihan has been leading a major initiative to get major corporations to agree to sustainability metrics.
Moynihan, working through the WEF’s International Business Council, helped develop a set of metrics for a broad interpretation of sustainability – from employment standards to environmental policies. The intention is to provide a response to a major concern that’s existed for decades and only grown stronger: Without shared standards, companies can either go the “greenwashing” route, where sustainability programs offer a nice ad campaign, or else make a genuine attempt at change only to find it’s difficult to implement in the existing system.
PwC has already signed on to the IBC’s standards, which are supposed to go into effect next year, and Ryan said he is “massively excited” about it. The announcement comes just days after BlackRock CEO Larry Fink wrote his annual letter to CEOs calling for the widespread adoption of such standards.
It’s too risky not to
Ryan said that banks are assessing the risk of not making investments in environmentally sustainable businesses and energy from multiple perspectives.
They are seeing it from local and federal policies aimed at carbon reduction, from consumers and employees who are increasingly citing it as one of their major concerns, and from the businesses they fund. Companies are increasingly planning for environmental risks to their growth, fuelled by man-made climate change. And then finally, Ryan noted, investors are looking at all of these stakeholders and want investment options with the potential to be both less risky and higher growth, given where the momentum is.
“I think all of those are converging, which is what’s going to push this to the top of the agenda,” Ryan said. “And what I’m optimistic about is it’s not just going to be the throwaway stuff, right?”