Home Banking The Trust Dividend for Banking with Purpose

The Trust Dividend for Banking with Purpose

by internationalbanker

By Elisa Leimer, Consultant, Lundquist





Covid-19 has shaped and continues to reshape the financial services sector. Banks have had to show tremendous resilience: rolling out digital solutions in a matter of days or weeks, keeping employees safe and operational, and supporting businesses and customers battered by the pandemic. Demonstrating a responsible response to the challenges became just as important as the business itself, in fact it became the business: “doing the right thing” became an imperative as the context aligned the success of financial institutions to those of their stakeholders, throwing into stark relief what it really means to be sustainable.

This alignment has generated a kind of “trust dividend” that successful banks can earn in the eyes of their stakeholders, a dividend that can bring real benefits like greater customer loyalty, investor interest and employee engagement.

As we look back over the past 18 months, it’s clear that the crisis has galvanised efforts to shift away from a pure focus on the bottom line to a wider consideration for what it means for a financial institution to thrive in the long term, accelerating the shift to long evoked stakeholder capitalism. Indeed, back in 2019, my colleagues at Lundquist published an article in these pages in which we asked: ”Sustainability in the banking industry: mere marketing gimmick or credible commitment?” Our answer was that banks need to show more credible actions to develop trust.

How has the pandemic affected banks’ commitment to stakeholders and wider society and who is leading the way forward? How have they navigated challenges such as the post-pandemic economic recovery, digital transformation, diversity and inclusion and pressing environmental issues such as the climate emergency? How are banks responding to the explosion in interest in sustainable and ESG investing? Above all, what kind of action has emerged as key to maintaining trust in the new normal?

How have European banks responded?

These questions have guided us in a new analysis of the banking industry through our flagship .trust research programme, in which we examined the performance of leading institutions in each of Europe’s biggest economies as well as emerging players and challenger banks. Through the lens of their digital corporate communications, we evaluated both the “substance” of content (identity, strategy, leadership, employer branding, etc.) as well as the “distinctiveness” of their storytelling and engagement.

Looking in detail at a representative selection of 16 European banks, we identified a leading group of top performers and four key areas of evidence that underpin their winning strategies in generating trust: helping societies prosper (and showing the evidence); stepping up in the post-Covid recovery; being inclusive employers; putting sustainability at the core of financial services.

Before we delve into how leading banks are taking action on each of these fronts, it’s key to understand the role of purpose in this new scenario. We found that 56% of the companies we studied explicitly refer to having a purpose and many leading banks use those statements to capture their new role in society and how there are translating that role into action.

Put simply, if the mission is a description of the what of a company, a purpose statement tries to answer why, the reason companies exist beyond selling products and services. It goes beyond the vision, too, which talks about where a company is headed.

Putting purpose to work

A purpose statement needs to go far beyond a simple slogan to express a company’s essence with the power to unite management, employees, and customers all the while serving society – a multi-stakeholder approach that benefits all. Look, for example, at UBS whose CEO Ralph Hamers recently presented its new purpose for “Reimagining the power of investing. Connecting people for a better world”.

Our research reveals almost half of those with purpose link it to their business strategy. Doing so provides credibility and concreteness to the messages communicated, as purpose is reflected in various aspects of the business. Banks that are reimagining the business strategy as a reinforcement of their purpose can show what their goals mean in concrete terms and in so doing, maximise the transformative potential of purpose.

NatWest, the self-proclaimed relationship bank, structures its identity and strategy around the new purpose “championing potential”. Besides changing its name in 2020, NatWest has stepped into fundamentally prioritising its purpose across the business, rethinking its strategy, approaches to relationship with customers and future expectations. The bank’s purpose gives coherence to all its communications, serving to remind stakeholders why NatWest does business the way it does.

HSBC, another leader in the strategic integration of its purpose, places sustainable development as a fundamental aspect of the strategy, values and purpose. HSBC’s purpose “opening up a world of opportunity” permeates across all aspects of the business, from strategy to hiring the right people. Banks can take note of the approaches displayed by NatWest and HSBC, which guide stakeholders through coherent messaging on their digital channels, ensuring a high level of trust.

But how are other banks going beyond high-level statements to generate trust in the business and show their contribution to society? Let us take a look at four key topics to successfully respond to the growing expectations of clients and their surrounding market context.

Stepping up in an emergency

During times of crisis, banks have an opportunity to build resilience. While doing so, they can showcase their relevance to society through a transparent and cohesive narrative. While 88% of banks communicate on how they acted to mitigate the impact of the Covid-19 emergency on clients and society, the effectiveness and consistency of this type of communication (that is, accessible and substantive information) is relatively low, with only 31% of banks detailing how precisely they responded to the crisis. Ensuring key topics are discussed (such as impact on dividends for shareholders or on employees’ day-to-day lives) in an accessible way is important to reassure stakeholders.

Intesa Sanpaolo has been fully committed to supporting institutions and society against the Covid-19 pandemic. Millions of euros worth of donations, suspension of mortgage payments and loans for businesses affected are just some of the ways the Italian lender stepped up. The bank has even gone so far as to track the positive impact of its contributions over time and communicate on all its efforts in a section of the website.

As we move post-crisis, Lloyds Banking Group demonstrates its ability to quickly respond to change, rebranding its purpose from “Helping Britain Prosper” to “Helping Britain Recover”. By linking its purpose to Covid-19 recovery, the company makes a strong case for its commitment towards society.

Inclusion as key to attracting new talent

It is no secret that many of today’s jobseekers are millennials with high expectations for integrated corporate values and strong purpose. Our research reveals that tackling the issues of inclusion and diversity is a common strategy this year for banks to showcase their qualities as good corporate citizens and employers.

Beyond attractive recruitment campaigns and career websites, banks are taking a much broader stance on the topic. To break down the perception that the industry is dominated by cisgender white abled men, social media is leveraged to share stories and initiatives addressing inequalities, race and gender disparities. Erste Group has various campaigns on their social platforms from #inspiringwomen, to video stories of employees coming out in the workplace and organising virtual lunches with experts discussing banking topics for the Women Hub.

Effectively linking commitments with distinctive information, UniCredit’s new diversity initiative page features a video gallery helping to create engaging and interactive messages, covering topics from women in leadership to unconscious bias. By complementing these commitments with personal stories about its employees, stakeholders’ needs are met through a combination of substance and distinctiveness.

For social impact, seeing is believing

Financial institutions have long taken their social responsibility seriously and we found 81% of the banks we analysed present special social sustainability targets. Yet only 19% showcase the progress towards such targets. While the first step towards societal involvement can effectively take the form of setting targets, banks have the power to be credible by providing concrete facts and data to give meaning to their commitments.

Deutsche Bank integrates its raison d’être fully throughout its digital channels, creating a #PositiveImpact upon which the bank’s purpose is based: ensuring communities and economies around the world thrive. Deutsche Bank highlights not only promises but also concrete actions taken to support society and the communities where it operates. By not only communicating on societal targets and achievements of the past year, but also sharing stories that give a voice to those impacted, corporate and societal goals are linked.

Sustainability at the heart of new busines models

Given the explosion in interest in sustainability and ESG, what does it mean to take a long-term perspective on banking? Almost all of the banks analysed (88%) present an approach to sustainability. However, only 44% of business strategies are explicitly linked to sustainability, therefore treating the future of the business and sustainability as somehow separate. Banks that integrate sustainability in a holistic manner and apply future-oriented thinking across different aspects of the business will likely prove more resilient and capitalise on the surge in demand for ESG products.

At Triodos Bank, an ethical bank based in the Netherlands, the key topic is not what they do as a corporate reality but rather why they do business, fundamentally blending business model and mission (to make money work for positive social, environmental, and cultural change). The bank’s purpose is the foundation of its business model, with positive impact acting as the conducting wire of the bank’s activities and narratives. The bank communicates a strong identity rooted in sustainable finance through a concrete and authentic corporate communications ecosystem.

Other banks have embarked on the journey towards new modes of communications, including UBS proposing a sustainable investment quiz to learn more about the topic and the offerings of the bank, and Natixis’ podcast Green in Mind looking at how financial institutions sustain their social and environmental commitments. Engaging users in this way can help banks distinguish themselves in the highly competitive context where they operate.

Which banks are leading the way?

The communication model developed with our research .trust calls for a balance between substantive information (like clear targets) and distinctive communications (such as storytelling) to create and maintain trust among stakeholders.

The companies that succeed in walking this fine line between substance and distinctiveness constitute the leading pack: BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, Intesa Sanpaolo, Lloyds Banking Group and Nordea.

Credit Suisse transmits its commitment to environmental and climate action throughout various aspects of its business. Besides having clear and transparent communications on its sustainability approach and targets, Credit Suisse sets itself apart through the consistent use of stories integrated within the website. From biodiversity finance to family business, Credit Suisse effectively engages its users on key topics for the company and society.

After an unprecedented global emergency and economic dislocation, the sense is that change too has become endemic and we should expect that the new normal should continue to throw up challenges, from disruption to business models, new challengers, and digital transformation. Our research shows that some companies were ready for this new normal and adapted, others simply responded. Having looked at the banking industry in Europe shows the strategies that successful, purpose-driven companies have adopted.

If banks want to continue to serve society’s needs, and not be left behind by shifting times, leaders will need keep pushing the boundaries of banking’s purpose to serve the communities within which they operate at all levels of the business, transforming how we perceive business entirely.

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