The “G” in ESG – What it means for bridging lenders

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The "G" in ESG

I nearly called this article, “How not to be like Boris”. And could you blame me?

Whatever your political affiliations, you only need to glance at 10 Downing Street right now to see what happens when governance fails.

It’s not a good look. Workplace harassment, misogyny, illegal parties, lewd behaviour, and unprecedented lying are all causalities of bad leadership.

In a world where 85% of investors are looking to work with ESG (Environmental, Social and Governance) companies, avoiding a corporate scandal has never been more important.

So how can bridging lenders ensure that their culture and reputation exceed expectations? Here are five things every firm can do to make sure they’re deserving of that ESG title.

1.   Be transparent

Governance can be a complicated issue. Should you prioritize the shareholders, or the stakeholders? Is it ok to cause damage to the planet if it means that you keep more people in a job?

Is it ok for bridging lenders to finance unsustainable construction techniques if it’s for  social housing? Tricky. And is it ever ok to position profit before purpose?

Naturally, different leaders have different philosophies. And that’s ok. Sometimes there isn’t a right or wrong approach. That’s why transparency is so fundamentally important. Whatever you chose to do, tell the truth about it.

You could even say that transparency is the starting point of good governance. The first square on the board-game. Otherwise… What’s the point, right? Leaders could say one thing and do another. (Ahem… #Partygate). Being honest is the minimum.

2.   Be clear about who you answer to and the company structure

Many bridging lenders operate in unregulated spaces. But that doesn’t mean leadership and oversight structure should be thrown to the wind.

It’s important to establish who is running the ship, and what their priorities are. Strong leadership and accountability help keep everyone on the same page. An important aspect of oversight is that the people responsible should be “looking at but not touching” the company.

For some bridging lenders, the Association of Short Term Lenders (ASTL) has become a de-facto overseer of standards. To become a member, firms must adhere to the ASTL code of conduct and values charter. The ASTL already has 40+ members and continues to grow.

But the ASTL is not perfect. The lack of diversity on the Executive Committee is so stark, I felt like I needed to adjust my screen settings. And it doesn’t seem like there are any real sanctions for lenders who break the rules. There’s still work to be done.

Clearly, bridging lenders still need to find their own strong leadership protocols and overseers if they want to prove their governance credentials.

3.    Bridging lenders need to build inclusive cultures

It seems like a waste of wordcount to explain why a good workplace culture is essential. It’s obvious. It sucks to hate where you work. From micro-managers to macro a**holes, toxic environments can really bring down morale.

94% of executives and 88% of employers agree that good culture is imperative to business success. Yet despite this, most leaders are blinkered when it comes to their own organization. One study revealed that senior managers see just 5% of the problems affecting employees at work… And there are a lot of issues that need attention.

For example, you don’t need to be a genius to see that the bridging industry has trouble attracting and retaining diverse groups of people. And this often comes down to the culture. If workplaces are only built for one group, they’re only going to attract one group.

Some ideas to get the ball rolling:

 

Offer genuine hybrid working

Physically coming into the office doesn’t work for everyone. People with disabilities would probably like the choice of whether to battle through public transport. Mums and dads might appreciate picking up their kids, saving the eyewatering cost of childcare. And employees with dependant parents may need to stay at home.

When you remove the obligation of being physically in the office, you remove the boundaries of privilege too, opening the door to more people.

Give EVERYONE a voice

Another quick win could be to encourage judgement-free, open, and honest conversations. This means, talking to someone who is not the line manager. A third party. Giving everyone – not just a well-paid few – a fair and equal voice means real issues may come to the surface. And leaders get a chance to correct them.

…Even when the conversations are difficult

Offering a confidential whistleblowing service could help retain valuable employees. Having been a young woman in finance myself, I would have appreciated a safe space to report sexual harassment and bullying. Several women like me experienced similar problems. But we would NEVER have been stupid enough to risk our careers by outing a C-suite man. So, we put up with the occasional inappropriate comment and left as soon as we had a couple of years’ experience on our CV. Having a safe space to talk could have disrupted that vicious cycle.

Simplify communications

This might just be the easiest one so far. Make sure images are inclusive. If your marketing documents have pictures of White, straight, able-bodied, middle-aged people, balance it out.

Use relatable language. Think if English wasn’t your mother tongue. Or if you struggle with hearing and reading. Or if you attended a school where Latin wasn’t part of the curriculum.

4.    Firms should check if their recruiting processes align with their values

Diversity doesn’t mean promoting in a tokenistic way. It means giving everyone an equal chance to get that promotion. And that starts with recruiting.

In the words of author and managing director, Jennifer Geary, “Cast the net as far and wide as possible. After that, just go for the talent and may the best person win“.

For bridging lenders, this could mean posting job descriptions in different places and avoiding jargon.

It could also mean contextualised recruitment processes. Sometimes getting Bs from an inner-city state school is way more impressive than straight As from an elite private school.

5.    Retaining and promoting diverse employees

Recruiting is just the beginning. Perhaps surprisingly, finance is good at this part. Women make up roughly half of the junior staff in finance. And refreshingly, Asian and Indian graduates are over-represented when it comes to holding a degree in economics or finance.

The problem comes later. These groups are not getting promoted. They watch their white male colleagues go higher and higher up the chain until one day, they’re the boss.

The issue is so concerning that less than 0.01% of senior positions are held by Black women. And the number of Black male investment managers is just 1%.

Every firm is different. But there are always things that can be done to support more people with their career. Recently, there has been a focus on supporting women going through the menopause – a physically draining time in life.

Here are some other low-hanging fruit bridging lenders could consider:

 

Offer paternity leave

There are also many ways to balance out the role of parents. Offering equal paternity and maternity leave is an obvious one. If both parents work in the same company – more common in finance than you’d think – why not let THEM decide how to divvy-up the time off? It’s not fair to the father, as well as the mother, that one parent needs to stay at home while the other works.

Re-think benefits packages

Many firms offer incentives and benefits like discounted gym memberships or health insurance. To give new parents a leg-up, consider offering support with day care centres and nurseries. One CEO I know recently hired a full-time nanny for a member of staff! … Or offer travel cards and lunch vouchers. As the cost of living crisis ramps-up, many people with dependants are struggling to make ends meet.

Give decent job titles

Ensuring that women have a decent job title before motherhood is key to helping them return to work. Women can pick up from where they left off, instead of starting again. Even if you can’t afford a pay rise, just that superior title can give women a real boost in the battle for equality.

What now…?

There are many things we didn’t cover here. And every bridging firm is different. Some analysts will also look closely at cyber-security, corruption, and risk management in their assessments, for example. Plus, the topic of diversity, inclusion and equity is far too big to squeeze into 1,500 words.

This is just a taster of what can be done. Just a toe in the door. Let us know your initiatives and ideas! Together we can build a stronger and more transparent community for everyone.