February 20, 2021 / VOLUME NO. 145
Who Tells Your Story?

Community and regional banks often appear to fall short on environmental, social and governance measures — an area that more investors are paying attention to when examining a company’s performance.

In fact, banks engage in a number of activities that fall within the ESG bucket, from promoting paperless statements (environmental) to creating incentives for employees to volunteer (social) to conducting board assessments (governance). 

Unfortunately, most institutions aren’t telling their story.

This was a key theme in my conversations with consultants and bankers that inform both an article we’ll publish on BankDirector.com on Monday, and an upcoming video for our Online Training Series in March.

There’s momentum building on ESG disclosure, to be sure. Ninety percent of S&P 500 and 65% of Russell 1000 companies produce a comprehensive ESG report, according to the Governance & Accountability Institute. The consulting firm’s report notes particular momentum among the mid-cap companies listed on the Russell — particularly those in the financial sector.

Meta Financial Group, which we featured in our 2021 RankingBanking study and is included in the Russell 2000, promises to soon join these ranks. Meta runs a unique operation: The $7.3 billion bank jettisoned its community bank division in early 2020 to focus on its core businesses, including prepaid cards, tax services and asset-based lending. When I interviewed Co-President and COO Brett Pharr, I found out he lived much closer to me than to Meta’s Sioux Falls, South Dakota, headquarters — practically down the road from Bank Director’s own offices in Brentwood, Tennessee. Suffice to say, transitioning to remote work came easy for the bank.

Meta recently hired Catherine McGlown, who formerly led corporate social responsibility programs at the health insurer Humana, to head its ESG efforts. 

“We were doing the right things,” Pharr explains, but “we weren’t telling the story.”

The examples I outlined above, like paperless statements, represent only the start of a company’s ESG journey; investors will expect further progress. But ESG should be a natural fit for financial institutions, given the industry’s level of regulation as well as banks’ ties to their communities. So, count me among those who believe there’s an opportunity for banks that take ESG seriously to turn it into an advantage for themselves. 

“When you sit down and talk to bankers about this, it’s interesting to see [their] eyes open,” says Brandon Koeser, senior manager and financial services senior analyst at the consulting firm RSM. “The reality is, so much of what they’re doing is part of ESG.” 

• Emily McCormick, vice president of research for Bank Director
Capital levels are high, and investors are asking banks: What have you done for me lately?

“The banking industry continues to make money.”
– Al Laufenberg, Keefe, Bruyette & Woods

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