By: 29 April 2024

OakNorth's director of sustainability and ESG strategy spoke to me about what OakNorth are doing in this space

Matt Bullivant on the importance of ESG

UK-based digital bank, OakNorth, has lent over £10bn to homegrown entrepreneurs since it was founded in 2015, creating more than 40,000 new jobs and 29,000 new homes. In addition to being known as “the bank for entrepreneurs, by entrepreneurs”, it is also known for its commitment to Environment, Social and Governance (ESG).

I spoke to Matt Bullivant, the company’s director of sustainability and ESG strategy, about how ESG affects its business as it looks to extend its operations in the US, the importance of ESG in business in general, and the responsibility fintechs have to lead by example.

Hi Matt, thanks so much for speaking to me today. Before we kick off, can you introduce yourself and give us a little background?

I’ve been with the firm for about two and a half years now. I’ve built the sustainability and ESG side of the business, from its beginnings to the strategy programme as it is today. My time is now spent embedding and growing that programme throughout the organisation.

I look at all sides of it. I look at the external facing bits like regulatory reporting; how we communicate and articulate this sort of thing to external stakeholders; our commercial strategy. I also look at the internal aspects like our employee engagement and carbon accounting.

It’s an ongoing journey; we’re building a lot. OakNorth has a lot of strengths, but one key attraction for me when I joined the company was its undiminished aspiration. OakNorth has the ambition to do more.

I’ve worked in the financial sector for a while; I’ve worked for high street banks. In my experience, larger, more traditional businesses often see ESG and sustainability as a tickbox exercise. How have you found that differs at OakNorth?

I’ll share the philosophical worldview that I think we have here. In financial services – or banks at least – you tend to find that there’s polarisation.

You have your particularly green or sustainable banks whose raison d’être is to be a green bank: that’s what they’re about. Then you have mainstream banks, who tend to have an ESG function siloed from the rest of its operations.

Our view is that ESG, including disclosure and reporting, should be embedded in everything that you do. That doesn’t make you a green bank; that makes you a properly-run bank.

That embedding is something we’re proud of. For every customer relationship, for every interaction where we’re writing a new deal, it’s part of the thought process.

That leads me to my next question. One of OakNorth’s goals is to go net zero by 2035. Does that make business more challenging in the short term, as you’re vetting partners and suppliers?

Yes, it affects business. But the point is that it affects our customers; this is something that is going to fundamentally change the economics of the UK and the world over the coming years, so to ignore it and to not think that it’s a business consideration is foolhardy.

We won’t be prescriptive about who we do business with right now, because everyone’s at a different stage in the journey. We work with scale-up companies with between £1m-£100m in turnover; they tend to be less mature in this respect.

Fundamentally, we want to look at how can we help those businesses to do more. We have to go on the journey with them; that means not going in with the sledgehammer and saying, “Where’s your net zero target right now?” It’s going in and saying, “Have you thought about the implications of climate for your business?”

It must help your brand when you’re aligning with entities that share similar values.

Well, I’m not expecting all our customers to have 2035 net zero targets next week; getting them to have 2050 is a good start! This is a journey that everyone’s got to go on, and there’s going to be some variation.

For our brand, it’s important that we’re not using ESG as a blunt instrument to say, “Well, either do this kind of business with us or don’t bother at all.” This is much more about saying, “This will matter to the longevity of your business and, as your finance partner, we should be talking about this.”

Getting our customers in a room with industry experts gives us a chance to show where their competitors have managed to drive their sustainability agenda and achieve profit. Maybe there’s something that they can learn from that conversation. If we can get everybody talking about ESG, they’ll see that it’s a nuanced and sophisticated part of any business.

I interviewed Tina Fisher from Intix last week. One of the things she talked about was that challenger banks have much better access to data than the traditional high street banks. As such, they’re causing problems for the high street banks; regulatory bodies keep changing the rules to keep up, and it’s tripping up traditional banks that aren’t as agile. Do you think there’s a similar thing in ESG?

Yes, I think so. Often the bigger the bank, the bigger the systems, the bigger the challenges when trying to change them. Legacy banking systems are designed to cope with financial data points, not non-financial data points. So that applies very much to ESG and sustainability data.

Sometimes the bigger banks have got so much data because they’ve got so many customers. They don’t necessarily know how to convert it into something useful. It isn’t always just the data, it’s what you do with it that counts.

The customers we have at OakNorth don’t tend to do sustainability reporting and disclosures, and are rarely calculating their carbon footprint or reporting it. But we bring in our own proprietary software with analytic modelling capabilities which enables us to identify where potential climate risks and opportunities may arise for them in the future.

That’s where the customer relationship is valuable because it means that you’re able to not just draw out the data, but draw out the context. Regulation and reporting stats, that’s only one part of the jigsaw. You might see a business with a high carbon footprint and think “Crikey, that doesn’t look good.” But if that business has reduced its carbon footprint by 20% year on year for the last three years? That changes your attitude.

The other piece of the jigsaw is that regulation changes fast. If you’re putting all your effort into complying with today’s regulation, you’ll find that in six months’ time the requirements are different. That’s what’s happening in a lot of bigger organisations where a lot of the resource is towards disclosing rather than actually doing something.

OakNorth is one of the leading ESG fintechs. Do you think there’s a responsibility for up-and-coming fintechs to drive sustainability and ESG within the wider financial markets?

Responsibility is a funny one. The reality is, we’re responsible for making the most of our strengths. We want to raise our customers’ awareness in a transparent way, so they understand the challenges and the potential outcomes of improving their ESG.

Are we responsible for influencing our customers to change their behaviour? Maybe. But when we do our job right, we naturally reveal so many opportunities for sustainability that industries would move without us directly having to say to them, “You ought to be more sustainable.”

Do you think it’s a case of the cream rising to the top? You don’t have a responsibility to push sustainability, but the world is moving towards sustainability so get on board or get left behind.

It’s tricky because I think there’s a lot of finger-pointing at financial services sometimes to say, “You control the purse strings, you have that power.”

I think, to an extent, that’s fair because we’re a big cog in the machine, but we’re not the only cog. You need regulators, policymakers, customers, and financial service providers on board too.

The reality is, because we have that power and scale of influence as a finance provider, we cannot just sit around and say, “If our customers aren’t interested, we can’t do anything.” We have to be more proactive and use our scale and influence to maximise the flow of capital. But it’s slightly more nuanced than simply saying we have a responsibility to drive the agenda forward.

I was reading that OakNorth are already in the US but you’re wanting to advance further into that market. That will obviously lead to growth of your company; how will your sustainability goals affect your growth and scaling drive?

ESG in the US is an interesting, colourful space at the moment. It’s become very politicised, so you can’t march in with a big ESG flag.

But ESG is a key consideration for businesses if they’re going to be run well. You know, if you are going to buy or invest in a property that’s near the beach in New Orleans, there are some obvious climate-related considerations relevant to the value of that asset.

There are ways of navigating the US space. There’s a huge amount in the US that’s been driven by the Inflation Reduction Act. A lot of industry is popping up around decarbonisation and electrification. Those are business opportunities that support any sort of net zero target, just by doing what they do. I think that is now a whacking great growth sector within the US!

I also think that it’s a really good time for us to go out there because of its banking market. The likes of Silicon Valley Bank disappearing have left a void for financing innovative growth businesses. There’s a whole rump of companies that we would ordinarily finance, who are in the right sort of sectors, who need a finance partner who do what we do.

Is it tricky going out there with 2035 net zero target? Frankly, that target is pretty ambitious, regardless of where you are. But I think we have to step away from the political headlines a little bit. This isn’t about chasing an ethical or moral agenda. This is an important consideration for the businesses that we lend to, and that doesn’t change.

Image: OakNorth

Robert Welbourn
Robert Welbourn is an experienced financial writer. He has worked for a number of high street banks and trading platforms. He's also a published author and freelance writer and editor.