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The road to net-zero: acceleration tips for financial institutions on our journey to a low-carbon future

To avoid the worst of climate change, the scientific consensus is that greenhouse gas emissions must fall to net zero by 2050. Many financial institutions have stepped up to the challenge. But what practical steps are they taking to move from conviction and commitment to concrete action and results?

To find out, Deloitte and the Institute of International Finance interviewed 135 industry executives in over 40 countries around the world. We've summarised their tips and experience in ten major findings.

Making a commitment makes a difference

Firms that commit show much greater readiness to meet the climate challenge and effects are pervasive—from higher levels of product innovation, to enterprise-wide engagement, and faster progress on data. A commitment maintains momentum when the inevitable challenges arise.

Delivering net zero almost certainly entails a transformation in your strategy

Net-zero means changing the ways a firm develops its products, interacts with customers, designs its operating model, attracts talent, and measures success. For three out of four firms in our survey, it’s the CEO who is ultimately responsible for delivering the net-zero strategy. That’s only as it should be, and why the tone from the top is essential.

Only the board can sign off and oversee changes of this magnitude

Firms are establishing governance structures equal to the scale of their ambitions. A net-zero strategy ultimately requires sign-off by the board because it alters the way a firm allocates capital and balances short and long-term returns. As a multi-year endeavor across multiple divisions and operating layers, tight programme management is vital.

The CSO-CEO nexus looks increasingly like the norm

Over 70% of firms in our survey have a CSO or equivalent (up from 31%, two years ago). Increasingly, CSOs report directly to their CEOs. CSOs need to be agile agents of change—engaging with every part of business, equipping them with new ways of thinking, and supporting each function to embed net-zero into business as usual (BAU).

As well as hiring for net zero, firms are baking in new responsibilities into most functions' BAU roles

Ideally qualified candidates are rare, but that isn’t stopping firms from hiring. Over 50% say they have added headcount or created new roles to deliver on their net-zero strategy. Client-facing teams must understand not only climate science but also the transition pathways of specific sectors so they can seize opportunities for business growth.

If you don't help your clients transition, somebody else will

Net-zero is shifting firms’ focus to new value drivers and opportunities. Firms are launching new products to accelerate their clients’ transitions. It's never been more important to understanding entire value chains. The success of your client outreach will likely determine your market share in years to come.

Risk skillsets are in high demand

From modelling climate scenarios to evaluating customer transition plans, risk skillsets are in high demand and constant evolution. Modelling methodologies are maturing rapidly as workarounds for data gaps emerge. But risk departments still have a long way to go. Only 3% of firms are confident they can assess the climate risks of individual customers.

Data problems can be overcome by using proxies for your ambitions

No one has data that is fully complete, accurate or sufficiently understood. The goal (for now) is to generate directional targets that are proxies for the firm’s ambitions and act as meaningful guides to action. The firms that report the most progress exploit external data sources and learn how to cope with the persistent fragmentation of the sustainable data universe.

The 'tone from the top' is mostly clear, it's the 'tone from the middle' that needs improving

We face a glass half full—nearly half the firms in our survey say their CEO’s internal messaging on net-zero is clear, consistent, and forceful (only 50% more to go, then!). But the tone from middle management is less consistent. That's where the battle for hearts and minds will be won (or lost).

Collaboration works; let's do it more

The only way to meet the unique nature of the climate challenge is through extensive collaboration across the ecosystem of peers, clients, scientists, non-governmental organizations (NGOs), governments, and regulators. Encouragingly, nine out of ten firms say the industry working groups they’ve joined—such as GFANZ, PCAF and trade bodies—are effective at finding joint solutions.

In the full report below, we have compiled dozens more acceleration tips, for firms at all levels of maturity. Have a read and let us know if you have suggestions that we've missed out.

The road to net-zero: How financial firms are moving to a low-carbon future

If you don't help your clients to transition, somebody else will.