Responding to societal challenges: a framework for boards and their directors

Banks and their boards need a more strategic approach to ever-evolving and sometimes competing expectations regarding their role in addressing societal challenges. Even as more and more companies and investors move away from the term “ESG,” the range of issues upon which banks are expected to take a stance, or to address directly through their business activities, continues to expand, from climate change to sensitive political and geopolitical issues. While all large corporations face these pressures, the largest banks are under particular scrutiny, viewed by activists and others as a transition mechanism for broader changes to the economy through their lending and financing activities. According to one bank board chair, “We are seeing our social license to operate tied to political issues, and we have to factor that into our strategic thinking. At the end of day, we’re in the business of managing risk, whether it’s climate risk or reputational risk, and you have to factor that all into how you think about strategy. If you come at this reactively, you will end up in a hell of a mess.”

Over the course of 2022 and the first half of 2023, Tapestry Networks and High Meadows Institute spoke with board directors and executives from some of the largest global banks, leading institutional and pension investors, regulators, industry associations, and other stakeholders to gather perspectives on how banks can more strategically respond to these issues. From this work, Tapestry and HMI developed the report, Responding to societal challenges: a framework for bank boards and their directors to provide context and guidance to bank leaders as they navigate the changing reputational risk landscape.