EY analysis shows that 65% of directors with sustainability experience have been appointed to their position in the last three years, up from 45% in June, reinforcing the accelerating growth of this skillset in the last few months alone. The average tenure of all directors with sustainability experience is 31 months, down from 49 months in June, compared to the average for all board directors of 61 months, up from 59 months in June.
EY analysis also shows that 46% of board directors with experience in sustainability have been appointed within the last year. Of all board directors, 13% have been appointed within the last year, 15% of whom bring sustainability expertise.
Omar Ali comments: “In the past six months we have seen a big increase in the number of directors with sustainability experience appointed to financial services boards, albeit from a low base. Climate change presents both a systemic risk and significant opportunity for financial services, and we expect boards to continue to build this expertise at this accelerated pace. Achieving net zero is impossible without financial services – a key message coming out of COP27.
“From a governance and risk management perspective, to manage the transition and to attract essential investment, having a deep understanding of the materiality of climate risks and opportunities is seen by investors as a competitive advantage. While most firms already count highly technical, specialist sustainability teams within their structure, they also need the right expertise at board level if they are going to make the progress, they want to on the green agenda.
“If firms maintain the recent pace of appointing board members with sustainability credentials and continue to develop and grow the talent pipeline, the European financial industry will strengthen its position as a leading force on the path to net zero. As more firms look to make these appointments, competition for the best talent will increase.”
Sustainability experience is most prevalent among female board members, and more likely to be accompanied by higher-level educational qualifications
Female board directors for financial institutions are far more likely to have professional experience in sustainability than their male counterparts according to the EY Boardroom Monitor. While the current gender split across financial services boardrooms stands at 58% male and 42% female, 72% of board directors with experience in sustainability are female.
Board directors with experience in sustainability are also more likely to hold high-level educational qualifications. For example, 19% of board members with sustainability experience hold a PhD, relative to just 11% of all board members across European financial services firms.
While 18% of board members across all European financial services firms monitored have an MBA, this rises to 26% of board members with sustainability experience. There is not a significant difference in terms of the gender or age of board members with higher educational qualifications.
Omar Ali concludes: “Board composition is fundamentally changing, and companies are building out their sustainability expertise and increasing female representation.
“Chairs participating in the EY Financial Services Chairs’ Interview Series told us that the best board members are those with the ability to think long-term, are resilient to short-term trends and stand up for their beliefs. They are looking to blend broad experience and specialist expertise to ensure the optimal position to pre-empt risks and change.
“Boards need to be future-proofed and built to contend with long-term structural shifts. This requires Chairs to navigate the balance of traditional and new skills on a space-limited board, which is particularly challenging currently, as firms operate in a heightened geopolitical and economic climate.”
About the EY Boardroom Monitor
- This is the second launch of the EY European Financial Services Boardroom Monitor and data collection ran between January - November 2022, and updates on the previous launch from June 2022.
- The EY Financial Services European Boardroom Monitor tracks and analyses data across a wide range of factors, including gender, age, professional experience and skills. It does not track the race and ethnicity of board members, as there is no standardized format for directors to disclose against.
- The EY Financial Services European Boardroom Monitor is comprised of disclosable, publicly available data on board appointments at listed banks, wealth and asset managers, FinTechs and insurers across the UK, Austria, Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Spain, Sweden and Switzerland, using the MSCI European Financials Index as the core universe.
- This release incorporates a survey of 300 European and UK-based fund managers who have, or are able to have, exposure to European financial services companies within their portfolios. The survey asks about the biggest risks to European Financial Services companies and where investors see the biggest skillset gaps within boardrooms.