Skip to main content
Perspective:
An almost perfect circular lake shot straight down from the air resembles the earth surrounded by a pine forest
Perspective

ESG and the product operating model in finance

Unlocking sustainability with an ESG strategy framework

The financial sector has become a pivotal player for sustainable change in the global ecosystem—not only ethically, but as a strategic necessity. Discover how integrating environmental, social, and governance (ESG) into the product operating model can help with risk mitigation, resilience, and long-term value creation for sustainability in finance.

ESG intervention in the product operating model
5 MB PDF

The purpose of ESG and the product operating model in finance

ESG is a mechanism to transparently communicate how organizations are operationalizing their sustainability agenda. It reflects the broad set of environmental and societal risks, opportunities, and disrupters by which an organization manages, measures, and communicates its performance. ESG has become important to financial services institutions as they experience increasing levels of environmental risk, changing societal norms, and demand from customers, employees, investors, and regulators.

A product operating model helps align organizational goals and customer needs by solving complex problems in iterative cycles that adjust to ever-changing market situations. It can help ensure end-to-end accountability, transparency, and security across the product life cycle.

Embedding ESG thinking into the product operating model

As a product operating model-driven delivery approach replaces the traditional project-driven approach across financial institutions, product and technology leaders should look at embedding ESG across the end-to-end product life cycle. This could help strategically prioritize the product stages to maximize impact while following an experiment-driven, iterative approach to ever-evolving goals.

ESG and product operating model integration use cases

Green finance refers to designing sustainable financial products that support sustainability-oriented and environment-friendly investments and activities. Examples include financial products such as green bonds to raise money for sustainability projects and credit cards providing reward points for ESG activities.

Green coding is an environmentally sustainable computing practice that seeks to minimize the energy involved in processing lines of code—helping organizations reduce overall energy consumption. Green infrastructure embeds energy-efficient hardware, server utilization optimization, and techniques such as autoscaling to promote optimal use.

As banks seek new ways to grow their businesses by including the historically underserved parts of society, they need to look beyond the typical data (for example, credit scores and balance sheets) considered for financing and start factoring unconventional data (for example, real-time cash flow, inventory levels, and stakeholder information).

Diverse teams are smarter as the diversity of thoughts and backgrounds leads to critical thinking, reduces biases, and brings a wider range of perspectives to trigger innovative products and features.

Banks—as custodians of individuals’ financial assets, entrusted with critical financial transactions—require ethical technology to uphold principles of trust, transparency, and fairness. This warrants a need to institute a digital governance framework that establishes accountability and decision-making authority for ethical product deployment.

Prepare for the future with an ESG strategy framework

Millennials and Generation Z are poised to become the overwhelming majority in the workforce. Gradually, there will be a transition of leadership from baby boomers to millennials. The younger generations believe business leaders play a crucial role in addressing the social and environmental issues.

These two generations have already started taking actions in their lifestyle choices for a sustainable future. The spillover of their mindset will be felt in their corporate actions, and the collective influence of these generations will shape the ESG agenda for the next decade.

The time to get started is now. Gain further insights into ESG and product operating model integration in our full report.

Did you find this useful?

Yes
No

Thanks for your feedback

Your feedback is important to us

To tell us what you think, please update your settings to accept analytics and performance cookies.

Need help updating cookies?

Get in touch

Tushar Daru

Tushar Daru

Financial Services Partner | Deloitte US